On December 15th, at midnight, the Russian Central Bank held an emergency meeting. The currency was in free fall, caused by a deadly mix of lower oil prices and western sanctions. The Rouble lost almost 50 percent of its value in four short months. On December 15th, the USD/RUB closed the day at 65.82, a massive 15 percent higher in a single day. Something had to be done.
The Russian Central Bank decided to hike interest rates by a shocking 650 basis points, from 10.5% to 17%. ‘’We had a choice between the very bad and the very, very bad’’, Sergei Shvetsov, the deputy governor of Bank would later say.
A Flash From the Past
I woke up that day staring at a 10% gain in the Ruble. The USD/RUB was now quoted at 59.50. After a quick double-take and a check on Bloomberg, I realize the reason behind the rally. But as everyone was busy buying Rubles, I got a flashback of Black Wednesday 1992. During most of 1992 Britain was busy propping up the Pound in order to keep it within the boundaries set by the ERM (Exchange Rate Mechanism). After spending massive amounts of money, the Bank of England took one last desperate step.
On September 16th 1992 at 11:00 AM, the BOE jacked up …
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