zlacker

>>colone+(OP)
When a currency is devaluating but interest rates are low, the banks can borrow at low rate, sell rubles for dollars into sliding market, wait for ruble to slide more, then repay the loan with cheaper rubles and make a big profit. The trouble is they also accelerate the slide, courtesy of the low rates. The central bank rate increase was likely done to head off that particular danger. Of course there are many other factors pressing the ruble down as well, which central bank can't control, but at least they are trying to prevent worseing the situation with their own hands.

Long term high interest rates plus high cost of import supplies will likely strangle the economy though. Increased demand for domestic goods due to higher import prices is a good thing, but one needs capital to operate most businesses. When interest rates are high you can't borrow, and when political situation is flaky fewer people will want to buy equity.

>>DenisM+ab
at 17% the interest rate paid by the RUB shorts amounts to 0.046% per day, whereas just today trough to peak USDRUB moved 35%. In this environment unless you "do a Sweden/Slovakia" and ramp rates to 1000% by preventing offshore banks from funding onshore (a form of capital controls), a measly 600bps hike is meaningless.

>>vegabo+Ob
Spot on. They now have two options

1) Increase the rate to something truly insane like 1000%

2) Introduce currency controls and force everyone to use Ruble

Neither of these options are good, but #2 seems much more likely.

>>imagin+jc
Back in the Soviet days, it was illegal to take Rubles out of the country. It wouldn't surprise me to see that law reinstated.

>>chiph+hd
Yeah, but back then they had two generations that never saw any dollars or iPhones or anything luxurious.

It will be a bit more complicated this time.

They might not have any other option though.