Central Bank of Russia hikes rates in an emergency 650 basis points

FXStreet (Guatemala) - Russia’s Central Bank have taken emergency precautionary steps to protect against a further collapse in their currency in hiking interest rates by the most since the nations 1998 default, the type of move that some analysts say could cripple the economy.

The Central Bank has increased the key rate from 10.5% to 17%. The Ruble depreciated by nearly 10% in overnight trade against the US dollar, moving through 60 for the first time on record and marked a high above 66.50 before settling back to 60.00.

The drop in the value of the Ruble is directly linked to the price of oil as Russia’s economy derives about 50% of its budget revenue from natural gas and oil taxes with 25% of the nations GDP is directly linked to the energy industry. The price of oil continues to fall, marking new lows. Brent crude made a low of $60.38 in European trade and WTI $55.01 was the low in the US. As the Ruble fell on Monday, the Central Bank said the economy could shrink by as much as 4.5& next year if oil averages at just $60/bbl.