The WSJ reports,"Russia's central bank boosted interest rates Friday, in a surprise move aimed at reining in inflation while the confrontation with the West over Ukraine escalates.
The decision followed a downgrade of Russia's credit rating to one notch above junk by Standard & Poor's Ratings Services, which turned up the pressure on beleaguered Russian assets".
Russia's already-slowing economy has been hard hit by capital flight during the Ukraine crisis, which continues to intensify.
The Bank of Russia raised its key lending rate by half a percentage point to 7.5%, confounding analysts' expectations for no change. When the central bank lifted rates by 1.5 percentage points in March, it said the move was temporary.
Russia's central bank boosted interest rates Friday, in a surprise move aimed at reining in inflation while the confrontation with the West over Ukraine escalates.
The decision followed a downgrade of Russia's credit rating to one notch above junk by Standard & Poor's Ratings Services, which turned up the pressure on beleaguered Russian assets.
Russia's already-slowing economy has been hard hit by capital flight during the Ukraine crisis, which continues to intensify.
The Bank of Russia raised its key lending rate by half a percentage point to 7.5%, confounding analysts' expectations for no change. When the central bank lifted rates by 1.5 percentage points in March, it said the move was temporary.
The ruble, which dropped after the rating downgrade, found only brief respite before closing in once more on its low of the day. It was 0.5% lower against the dollar at 35.962.
Russian stocks and bonds fell after S&P earlier cut its rating on Russia one level, to triple-B-minus from triple-B, citing large capital outflows in the first quarter. Moscow's RTS index traded down 1.2%, hitting its lowest level since mid-March.
While the price of oil—Russia's main export—stagnates, money is leaving the economy amid feeble economic growth, a lack of reforms and rising political risks from the Ukraine crisis. Capital outflow was more than $60 billion in the first quarter alone, while the ruble has lost more than 10% after Russia's annexation of Crimea. The Russian economy is expected to grow by just 0.5% in 2014, the lowest level since the 2008 crisis, but the Finance Ministry has said it considers even this meager growth outlook to be too optimistic.
