Russian Currency Crisis: Putin Has No Good Solutions
Well, it looks like Russia is in for a long, cold, and economically devastating winter.
With its currency stuck in a disastrous freefall thanks to Western sanctions and plunging oil prices, the country’s central bank announced around 1 a.m. last night that it would jack up its key interest rate from 10.5 percent to 17 percent. This was a desperate decision. The country was already hurtling toward a recession, and the rate hike—the biggest since 1998, when a financial crisis eventually forced it into default on its debt—was sure to make the pain far worse. But the hope was that, with higher interest rates, investors would finally stop pulling their money out of the country—that, as the New York Times’s Neil Irwin put it, keeping money at a Russian bank would simply be “too good an offer to refuse.”