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Economics

Even Without Sanctions, Russia's Economy Is Looking Sicklier Than Ever

Safety deposit boxes inside an OAO Rosbank bank in Moscow on April 22
Safety deposit boxes inside an OAO Rosbank bank in Moscow on April 22Photograph by Andrey Rudakov/Bloomberg

Signs of Russia’s growing economic distress became even clearer today, as the central bank unexpectedly raised interest rates for the second time since March, while Standard & Poor’s cut the country’s debt rating to one notch above junk.

In lifting the benchmark borrowing rate from 7 percent to 7.5 percent, the bank said it was acting to cool inflation that’s now running above 7 percent. But, says economist Tim Ash of Standard Bank in London, “it has nothing to do with inflation. It’s all about signaling that the central bank is shoring up its defenses” to strengthen the ruble and stem the flight of capital from the country.