The Russian Central Bank has increased borrowing costs to 10.5 percent to avoid a further rout of the ruble. The currency has lost more than 40 percent this year, and annual inflation is slated to reach 10 percent.
Rising inflation spurred the aggressive rate hike. The bank sees inflation hitting 10 percent for 2014. As of December 8, inflation stood at 9.4 percent, according to the Central Bank.
“Consumer prices continued to accelerate in November and the beginning of December. The increase in inflation and the expectation of devaluation creates a significant risk for inflation,” the bank said in a statement, released Thursday.
The regulator increased the rate by 100 basis points, bringing this years’ total increase to 500 basis points. At the beginning of the year the benchmark interest rate was 5.5 percent.