From the Washington Post:
The sharp interest rate hike — from 10.5 percent to 17 percent — promised to throw Russia’s economy into a deep recession next year, and it was a sign that Russian policymakers feel they have few options left to fight the crisis.
The sharp interest rate hike — from 10.5 percent to 17 percent — promised to throw Russia’s economy into a deep recession next year, and it was a sign that Russian policymakers feel they have few options left to fight the crisis.
On Tuesday, top economic officials said, in effect, that Russians would simply have to get used to worsened living standards.
Deputy Prime Minister Olga Golodets said poverty would “inevitably rise” because of inflation.
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Russia’s economy was already in trouble before the March annexation of Ukraine’s Crimean Peninsula and subsequent support for pro-Russian rebels in eastern Ukraine. Those decisions sparkedWestern sanctions and the worst tensions between Russia and the West since the Cold War. The unpredictable environment has spooked investors, which the Central Bank predicts will pull$128 billion from Russia this year.
The rapidly souring economic conditions may spur Russia to be more conciliatory on Ukraine. On Tuesday, Russian Foreign Minister Sergei Lavrov reversed a call for Kiev to cede more power to Ukraine’s regions, a basic Russian demand since pro-Moscow Ukrainian President Viktor Yanukovych was toppled in February.
Secretary of State John F. Kerry praised the Russian moves on Tuesday, raising the prospect of an easing of sanctions. “There are signs of constructive choices,” Kerry told reporters in London, referring to the cease-fire.
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“In the last couple of days, oil has stayed completely stable and yet Russia had a total panic,” said Sergei Guriev, an economist at the Sorbonne in Paris. “This panic is triggered by the realization that the Russian government has no idea what to do.”
