Russian Economy Plummets Despite Central Bank Action

10 Dec , 2014

The World Bank has warned that the Russian economy would shrink by at least 0.7% in 2015 if oil prices do not recover.

This revelation forced Russia's central bank to admit that it intervened last week to support the rouble in foreign currency markets spending a total of $4.53bn (£2.9bn).

Furthermore, it has spent more than $70bn supporting the rouble since the start of the year.

Despite this, both the currency and Russian share indexes fell on Tuesday as global oil prices fell to a new five year low.

Analysts have suggested that it will probably take a significant hike in interest rates to stop the currency from further falls as well as surging inflation, which stood at 9.1% in November.

The bank has already raised interest rates by 1.5% in October to 9.5%. It is expected to raise interest rates further later this week.

On Tuesday the rouble fell by 0.9% against the US dollar to 54.25 roubles and lost 1.1% to 67.00 against the euro.

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