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In response to the sanctions from the West amid the Ukraine crisis, the Bank of Russia has decided the raise the key interest rate to 20% per annum from 9.5%.

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“The new sanctions imposed by foreign states have entailed a considerable increase in the ruble exchange rate and limited the opportunities for Russia to use its gold and foreign currency reserves,” Bank of Russia Governor Elvira Nabiullina said in a statement. 

Meanwhile, US and allies have imposed new sanctions that target, the Bank of Russia, Russia’s national wealth fund and the Russian Ministry of Finance. 

The US has barred its citizens from transacting with the Russian central bank, finance ministry and national wealth fund, which will impact the Russian economy by pushing inflation higher while reducing investments and purchasing power.

These sanctions effectively ‘immobilise’ any assets of the Russian central bank held in the US or by US persons, it noted. 

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US Secretary of the Treasury Janet Yellen said: “The unprecedented action we are taking today will significantly limit Russia’s ability to use assets to finance its destabilizing activities, and target the funds Putin and his inner circle depend on to enable his invasion of Ukraine.” 

The UK has also implemented similar sanctions on Russia and said that the government plans make “further related designations this week”. 

“Working with allies, we will cripple Russia’s economic development in both the short and long term. The UK and our allies are united and clear that nothing and no one is off the table,” it added.

Joining the US, UK and EU, Deputy Prime Minister and Minister of Finance of Canada Chrystia Freeland announced that “all Canadian financial institutions are prohibited from engaging in any transaction with the Russian Central Bank.”

Canada has also prohibited dealings with the Russian sovereign wealth fund and frozen its assets in the country. 

The move follows the West’s decision to block selected Russian banks from the SWIFT or the Society for Worldwide Interbank Financial Telecommunication. 

Responding to the move, the Bank of Russia Governor said that “we have the financial messaging system (FMS) that can replace SWIFT inside Russia and allows the connection of foreign participants”.