Early this morning I said that:
And that’s the point here about the ruble. That rise in interest rates to 17% should work. Should stabilise the currency, aid it to regain some of its lost value against the dollar. But, and here’s the catch, only if everyone believes that the government’s going to stick with it. 17% interest rates really aren’t going to be good for that Russian economy. In fact interest rates that high are going to strangle many a business. If the markets believe that the central bank is going to allow that to happen in order to defend the ruble then it will indeed defend the ruble. But if they think, as they did in the UK’s experience, that the pain won’t be undertaken then the ruble will continue to fall: and perhaps faster than it has been.
It’s way to early to be able to tell which way this is going to go. But it does remain true that the outcome is in doubt.
At the moment the ruble is down another 26%…..