2022-02-28-牛津经济研究院-Russia_CBR_s_huge_rate_hike_unlikely_to_restore_financial_stability_3页_198kb

Summary

Context

• Following Russia's invasion of Ukraine, the US and EU imposed severe sanctions, including banning certain Russian banks from SWIFT and freezing assets of Russia's central bank (CBR), leading to panic in domestic markets and prompting a policy rate hike.

Central Bank Response

• Russia's Central Bank (CBR) increased the policy rate from 9.5% to 20% (a 1050bps hike) and implemented capital controls, such as requiring exporters to sell 80% of foreign currency gains and limiting securities sales by non-residents.
• Additional measures included macroprudential tools, allowing use of reserves for loans and suspending stock trading to support the rouble and banking system.

Financial Market Reaction

• Market panic intensified, with the RTS stock index plunging, cash withdrawals by households, and divestment of Russian assets by companies like BP and Norway's sovereign wealth fund.
• Rating agencies downgraded Russia's sovereign debt; S&P to BB+ and Moody's on review for downgrade, indicating potential "junk" status.
• FX reserves are high ($630bn), but sanctions may freeze foreign assets, with gold reserves ($133bn) potentially used for stabilizing efforts.

Broader Economic Impacts

• External debt repayments are manageable at around $62bn, though sanctions risk technical defaults and disrupt refinancing. Capital controls and SWIFT bans could exacerbate liquidity issues for exporters.
• Measures like a RUB-denominated deposit compensation scheme could mitigate currency conversion pressures but may incur significant fiscal costs.

Outlook

• Peace talks with Ukraine's delegation in Belarus offer a glimmer of hope, but results are premature. Ongoing sanctions and market uncertainty mean challenges persist, with the CBR's actions dwarfing past crisis responses.