Russia's financial system is being hit with something far from a normal set of sanctions, and is better seen as a form of economic war in an attempt to completely isolate Russia economically.
Russia’s central bank has doubled its interest rates to 20% as a response to the rouble plunging. This was in a bid to halt a complete slump in the value of its currency.
The ruble fell as far as 119.50 per dollar, down a whopping 30% from Friday’s close. It later pared some of its losses, trading at 93.04 per dollar by 3:30 p.m. in Moscow, still down roughly 20% against the dollar in the last year.
This rise in interest rates is said to cushion the effect of the plunge of the Rouble to citizens as it will compensate for the increased depreciation and inflation risks.
This follows the central bank’s order to halt foreigners’ bids to sell Russian securities in an effort to contain the market fallout.
The Central Bank stated that "This is needed to support financial and price stability and protect citizens' savings from depreciation". This is a similar response to when Russia annexed Crimea which led them to increase interest rates to 17%.
These economic sanctions have undoubtedly hurt Russia, with JP Morgan predicting a 20% shrink in Russia’s economy for the second quarter, however, we see the Russian attack continuing and causing further damage to Ukraine. Could more be done by European countries and do they need to take a different approach to effectively help Ukraine?
Written by Rohand Dhir