Russia Raises Key Interest Rate to 17%

By Alexander Kolyandr 

        MOSCOW--Russia's central bank, in a bid to stem a sharp decline of the ruble, raised its key interest rate Tuesday to 17% from 10.50%, effective Tuesday.
        In a statement published after midnight Moscow time, the Bank of Russia said it also is raising its repo rate to 18% from 11.5% and increasing the volume of foreign currency it offers banks at the repo auctions to $5 billion from $1.5 billion.
        The bank was criticized for a lack of action Monday when the ruble lost more than a 10th of its value against the dollar in the sharpest daily drop in more than a decade. The bank raised the rate by 100 basis points Thursday, which failed to put a stop to the ruble's decline, which has lost about 50% since the start of the year.
        In its statement, the central bank said it is raising the key rate by 650 basis points as it needs to "limit devaluation and inflation risks, which have risen seriously" recently.
        In a separate statement, the bank said it is fixing the rate for infrastructure project loans at 9%, 800 basis points below the key rate.
        Write to Alexander Kolyandr at alexander.kolyandr@wsj.com
        (END) Dow Jones Newswires

        December 15, 2014 17:42 ET (22:42 GMT)

By Alexander Kolyandr, Andrey Ostroukh and Chiara Albanese 

        MOSCOW--Russia's central bank, in a bid to stem a sharp decline of the ruble, raised its key interest rate Tuesday to 17% from 10.5%.
        In a statement published after midnight Moscow time, the Bank of Russia said it also is raising its repo rate to 18% from 11.5% and increasing the volume of foreign currency it offers banks at the repo auctions to $5 billion from $1.5 billion.
        The bank was criticized for a lack of action Monday when the ruble lost more than a 10th of its value against the dollar in the sharpest daily drop in more than a decade. The bank raised the rate by 100 basis points on Thursday, which failed to put a stop to the ruble's decline.
        In its statement, the central bank said it is raising the key rate by 650 basis points as it needs to "limit devaluation and inflation risks, which have risen seriously" recently.
        In a separate statement, the bank said it is fixing the rate for infrastructure-project loans at 9%, 800 basis points below the key rate.
        The ruble's drop Monday--the largest in a single day since 1999--brings the slump to nearly half since the start of the year and more than one-fifth this month. As the ruble fell, Russia's central bank said the economy could shrink by as much as 4.7% next year if oil averages $60 a barrel, not far below the current price of Brent crude, the global benchmark.
        The currency's dive and forecasts of heightened economic pain raise the stakes for President Vladimir Putin, who is locked in a confrontation with the West over his intervention in Ukraine.
        The Kremlin's options for stemming the slide are narrowing. Earlier this year, the central bank sold nearly $75 billion to prop up the ruble, but with little effect. It allowed the currency to float freely in November, and has spent some $6 billion since then.
        The central bank had been shying away from large-scale interest-rate increases, which have the potential to cripple the economy.
        Write to Alexander Kolyandr at alexander.kolyandr@wsj.com, Andrey Ostroukh at andrey.ostroukh@wsj.com and Chiara Albanese at chiara.albanese@wsj.com
        (END) Dow Jones Newswires

        December 15, 2014 18:01 ET (23:01 GMT)

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