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In Fear of Sanctions, Russia's Central Bank Raises Key Interest Rate

Published: July 26, 2014 (Issue # 1821)



  • Russia's Central Bank raised its key interest rate to 8% on Friday.
    Photo: Wikimedia Commons

Russia's Central Bank on Friday unexpectedly raised its key borrowing rate for a third time this year in expectation of heightened international economic sanctions against Russia over the unrelenting crisis in Ukraine.

Russia's main financial regulator increased the key rate from 7.5 to 8 percent, saying that even in the present situation of slowing economic growth, quelling inflation is its main priority.

The decision comes as Russia is embroiled in the worst political standoff it has seen with the West since the end of the Cold War. The downing of Malaysia Airlines flight MH17 in conflict-torn eastern Ukraine on July 17, which led to the deaths of all 298 people on board, has prompted the United States and European Union to consider more wide-ranging sanctions against Russia unless the government cooperates on de-escalating the conflict.

"Inflation risks have risen, connected, among other things, with the increased political tension and with its possible impact on the dynamics of the national currency rate, as well as with the changes in tax and tariff policies that are being discussed," the Central Bank said in a statement on its website.

"This decision is both unexpected and controversial," Alexander Morozov, chief economist for Russia and the CIS at HSBC, told The St. Petersburg Times.

EU ambassadors on Friday reached a preliminary decision to move ahead with economic sanctions, with likely measures to include closing off EU capital markets to state-owned banks and halting future arms sales to Russia, Reuters reported.

According to Morozov, raising the key interest rate was a drastic response to the phantom risk of sanctions, whose content and possible effects cannot yet be known.

"The Central Bank still had other means to deal with inflation, such as making its control of the banks more efficient," he said.

The Central Bank has already increased its key rate from 5.5 to 7 and then to 7.5 percent this year in an attempt to counter the impact that the depreciating ruble has had on the price of imports. The ruble fell 10 percent against the dollar and euro in the early months of this year but has since recovered some ground, hovering around 35.15 to the dollar and 47.18 to the euro on Friday evening.

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Friday, Oct. 31


Put your grammar and logical thinking to the test in a fun and friendly environment during the British Book Center’s Board Game Evening starting at 5 p.m. today. The event is free and all are welcome to attend.



Saturday, Nov. 1


The men and women who dedicate their lives to fitness get their chance to compete for the title of best body in Russia at today’s Grand Prix Fitness House PRO, the nation’s premier bodybuilding competition. Not only will men and women be competing for thousands of dollars in prizes and a trip to represent their nation at Mr. Olympia but sporting goods and nutritional supplements will also be available for sale. Learn more about the culture of the Indian subcontinent during Diwali, the annual festival of lights that will be celebrated in St. Petersburg this weekend at the Culture Palace on Tambovskaya Ul. For 100 rubles ($2.40), festival-goers listen to Indian music, try on traditional Indian outfits and sample dishes highlighting the culinary diversity of the billion-plus people in the South Asian superpower.



Sunday, Nov. 2


Check out the latest video and interactive games at the Gaming Festival at the Mayakovsky Library ending today. Meet with the developers of the popular and learn more about their work, or learn how to play one of their creations with the opportunity to ask the creators themselves about the exact rules.



Monday, Nov. 3


Non-athletes can get feed their need for competition without breaking a sweat at the Rock-Paper-Scissors tournament this evening at the Cube Bar at Lomonosova 1. Referees will judge the validity of each matchup award points to winners while the city’s elite fight for the chance to be called the best of the best. Those hoping to play must arrange a team beforehand and pay 200 rubles ($4.80) to enter.



Tuesday, Nov. 4


Attend the premiere of Canadian director Xavier Dolan’s latest film “Mommy” at the Avrora theater this evening. The fifth picture from the 25-year-old, it is the story of an unruly teenager but the most alluring (or unappealing) aspect is the way the film was shot: in a 1:1 format that is more reminiscent of Instagram videos than cinematic art. Tickets cost 400 rubles ($9.60) and snacks and drinks will be available.



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