Currencies, Emerging Markets, Funds / ETFs, Stocks

Russia’s Central Bank Increased Its Main Interest Rate By More Than Analysts Expected

Central Bank of RussiaAs a result of plunging global oil prices and Western sanctions hurting the Russian economy, the rouble has been sliding. In order to protect the currency, today Russia’s central bank hiked its main interest rate by 1.5 percentage points, which is more than analysts expected.

On a cumulative basis, the Central Bank of Russia increased the reference  rate by 4 percentage points, despite the economy’s weakness.

“This represents a pretty bold move by the central bank to regain the initiative, having been faced with a collapse of their currency,” said Neil Shearing, chief emerging markets economist at Capital Economics.

The central bank has been under pressure to raise rates to defend the rouble. The currency has lost around 20% against the U.S. dollar since mid-year due to falling prices of oil and the sanctions imposed over Russia’s annexation of the Crimea and the military intervention in the Eastern Ukraine.

Standard Bank analyst Timothy Ash said Friday’s rise would probably not be enough. “Market reaction suggests that they will need to do more – which could well push the Russian economy formally into recession” he noted.

Investors can access Russia stock market via three mainstream ETFs: Market Vectors Russia ETF (RSX), iShares MSCI Russia Capped ETF (ERUS) and SPDR S&P Russia ETF (RBL) [Generic Comparison Analysis of Three Mainstream Russian ETF’s (Iconographic)].


Source: Reuters, Market Vectors, iShares, SPDR

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