Russia Raises Rate to Bolster Economy After S.&P. Cuts Its Debt Rating

[mia]

Source: The New York Times

MOSCOW — With tensions over Ukraine continuing to mount, Russia is scrambling to stem the economic fallout, as its central bank unexpectedly raised a crucial interest rate on Friday.

The move is intended to help halt the slide in the country’s currency and stem the exodus of capital, both of which are intensifying the country’s economic problems.

Hours earlier, the rating agency Standard & Poor’s downgraded Russia’s debt to the brink of junk status, citing the destabilizing effects of capital flight from Russia.

In the first three months of the year, Russian and foreign investors have moved $51 billion out of the country, according to S.&P. That sum is nearly as large as the average annual outflows of $57 billion over the last five years.


Read more: http://www.nytimes.com/2014/04/26/business/international/standard-and-poors-cuts-its-rating-on-russia-citing-capital-flight.html?_r=0

[davidpdx]

1. But wait, I thought the sanctions weren't going to have any effect

Well, I guess you can't believe everything you hear on DU.

[Fearless]

2. The exodus is caused by Russian instability as cited in the article.

[mia]

5. the U.S. and EU haven't so far imposed the sweeping sanctions they have threatened Russia could face

The Russian economy has suffered since the crisis exploded in late February even though the U.S. and EU haven't so far imposed the sweeping sanctions they have threatened Russia could face if it continues to undermine the pro-Western government in Kiev.

http://online.wsj.com/news/articles/SB10001424052702304788404579523261441846796?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304788404579523261441846796.html

[DallasNE]

3. It Is Easy To Understand Why Russia Did This

Protecting the Ruble protects the oligarchy plus it keeps oil revenues from falling sharply. That part was a no-brainer. But it also will further slow the weak economy, hurting the average Russian. One this is clear, the economic sanctions are having the intended effect.

[pampango]

4. Higher interest rates don't "bolster" the economy. They slow it down, but they

do protect the value of the currency.

Russia's strength is its military - particularly so close to its own borders. It's weakness is its economy. It is wise not to compete with their strength but focus on their weakness.

[Tarheel_Dem]

6. Bring on the tougher sanctions. Until the hurt trickles down to the average Russian....

nothing will change Putin's egomaniacal behavior.