Ukraine war: Russia's central bank is fighting against the ruble's decline with record interest rates

The West's tightened economic sanctions are having an effect: the value of the ruble fell to a record low on Monday morning.

The Russian central bank is attempting to counteract the currency's depreciation by raising interest rates massively.

The key interest rate will be more than doubled from 9.5 to 20 percent, as the currency watchdogs announced in Moscow on Monday.

At the same time, they signaled their readiness for further increases.

According to Russian media, the central bank justified the move with a "dramatic change" in the external conditions for the Russian economy.

Russia's escalating conflict with the West following its invasion of Ukraine caused the country's currency to plummet.

In the morning, the Russian ruble lost about eight percent against the US dollar.

In return, a dollar cost around 90 rubles as much as never before.

In so-called offshore trading outside of Russia, the national currency had previously fallen even more.

In return, the dollar temporarily rose by almost 42 percent to a record high of 119 rubles on the EBS trading platform.

On the Russian stock exchange, currency transactions could only be made three hours late on Monday morning.

Higher interest rates can help stabilize the exchange rate and also curb inflation, but they also make loans more expensive – for investments, for example.

The Ministry of Finance also introduced an obligation for companies to sell part of their proceeds in foreign currency.

The measure should also aim to limit a fall in the value of the rouble.

A sharp increase in the key interest rate, the central bank said, would lead to an equally sharp increase in interest rates on deposits in Russian banks, which should compensate depositors for “increased risks of devaluation and inflation”.

"This will help maintain financial and price stability and protect citizens' savings from falling in value," the central bank commented.

Central bank chief Elvira Nabiullina will explain the measures during the course of the day in a press conference.

According to information from Brussels and Berlin, the EU put into effect the announced serious sanctions against the Russian central bank during the night.

They include a ban on transactions by the bank in relation to Russia's large currency reserves in euros.

In addition, the assets of the bank in the EU are confiscated.

Chancellery State Secretary Jörg Kukies announced in a tweet that the United States would take similar steps.