Russia’s Overnight Lending Rate Hits 19%, as Mistrust of Banks Spreads; Ruble Up Again

Jon Banking, Blogosphere, Economy

In Russia, the overnight lending rates between banks has soared to 19%, a sign of widespread and warranted mistrust between banks, as one bank has failed. To stabilize the situation, Putin is considering bank deposit insurance up to an amount equivalent rate of about $26,000.
Meanwhile, and although Russia is still burning through currency reserves, the value of the Ruble has been rising.
CNN Money reports Russia Empties the Vault to Prop Up Ruble.
So far this year the central bank has burned through more than $110 billion in foreign currency supplies. That’s more than a quarter of what it has in reserves right now.
Spending has ramped up in the last few weeks. Since the start of December, the central bank has blown through more than $21 billion.
That, along with a series of other measures to support the banking sector, has helped to stabilize the ruble.
[Mish comment: Actually, blowing through reserves is destabilizing, but other measures such as the huge hike in interest rates is indeed stabilizing]

This post was published at Global Economic Analysis on December 26, 2014.