Russia’s central bank raised its main lending rate again on Thursday to prop up the rouble – it didn’t work.
The currency sank to a new low: one dollar is now worth close to 55.5 roubles.
The fifth increase this year took the key rate to 10.5 percent.
The central bank plans further raises if annual inflation continues to head up. It hit 9.1 percent last month.
In a sign of its growing concern, the central bank used much stronger language than previously as it revised down economic growth forecasts for the next three years.
Many economists believe Russia is heading for a full-blown financial crisis and will enter recession next year as Western sanctions over Ukraine show no sign of being withdrawn soon and plummeting oil prices are threatening the country’s main source of export revenue.
The bank has now raised rates by 5 percent this year, despite a sharp slowdown in economic growth.
“There is no way this won’t be impacting the banks and the corporates,” said UBS strategist Manik Narain.
“They should send a much more determined signal that they will do whatever it takes, for as long as it takes.”