Passersby walk past a currency exchange desk in a street in central Moscow, 12 December 2014 ( AFP / File / Kirill Kudryavtsev)
The Central Bank of Russia has decided to take drastic action Tuesday after a historic plunge of the ruble in an attempt to regain control face a crisis to consequences more dramatic for the population.
The intervention of the Bank of Russia comes two days before a much-anticipated press conference of President Vladimir Putin remains popular in his country despite the Ukrainian crisis, the ongoing wrangle with the West and the prospect of an early accession of the Russian economy into recession.
Following an emergency meeting, the Bank of Russia announced in the middle of the night, exceptionally, an increase of 6.5 points in interest rates at 17%, against 10.5% previously and 5.5% at the beginning of the year.
A strong reaction was inevitable: the Russian currency was down nearly 10% in a single day Monday, a fall seen since the period following the placement of the Russian default in 1998
. At its worst levels Monday, she was worth only half its value at the beginning of the year against the dollar and 42% lower against the euro, the result of Western sanctions introduced in the wake of the crisis in Ukraine and the fall in oil prices
very practical consequence:. rising prices already approaching 10% year on year and promises to fly again. The authorities have seen in recent days reappear foreign currency labels in some stores, common in the 1990s
-. Turning? –
By dramatically increasing the cost of money, the Bank of Russia raises the return on investments and deposits in rubles, which could become lower than inflation, causing massive new conversions. It tightens the credit tap that prices revved more.
With this decision “unexpected and strong”, “the central bank may have finally taken the lead in the monetary crisis ever more serious than through Russia, “commented economists London firm Capital Economics, citing a potential” turning point “.
” The price, however, will be a further tightening of credit for households and businesses and a deeper decline in the real economy in 2015, “they added.
With a rate at 17%, this means that a mortgage will now be granted at a rate of at least 22%, calculated the website Lenta.ru, difficult to maintain a level of household purchasing power battered by rising prices.
Russia is now virtually isolated from Western financial markets sanctions introduced after the annexation of the Crimea in March and his alleged intervention on the side of the separatists in eastern Ukraine. She hit hard by falling oil prices, which together with the majority of the gas budget revenues
-. Recession –
If the government already provides a recession ( -0.8%) next year after growth of around 0.6% this year, the central bank warned on Monday that if oil prices remain at current levels around $ 60 a barrel, the domestic Crude could drop at least 4.5%.
The central bank was criticized for acting too slowly, reacting late to the gradual falling currency and rising inflation, and too cautiously, appearing powerless to factors that do not depend on it. sanctions and oil markets
It was all the more eager to take action the government for its part is content Russians call for patience. According to press reports, the government is preparing to cut back on spending to match the decline in oil prices.
Given the scale of events, the idea of introducing restrictions on capital movements, rejected for now by Vladimir Putin, was discussed again, analysts fearing that it would ruin the credibility of Moscow in the markets.
“The decision of the central bank confirmed that M . Putin continues to support an orthodox policy on the part of the bank “with monetary measures rather than restrictions on the market, said Alexander Kliment, the consulting firm Eurasia Group in International Relations.
According to him, the president continued, “two key objectives: maintaining fiscal stability and protect cushion of protection as are the foreign exchange reserves to a period of low oil prices and insulation of international capital markets”
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