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Russia on Monday announced that it would hike its key interest rate to 17 percent, effective Tuesday, citing rising devaluation and inflation risks.
The bank had raised the rate by 100 basis points to 10.5 percent last week in an effort to stem a run on its currency.
Earlier on Monday, the Russian ruble saw its biggest drop since 1998, but strengthened after the decision. It was last trading at 62.50 versus 65.50 before the announcement.
"This decision is aimed at limiting substantially increased rouble depreciation risks and inflation risks,'' the central bank said in a statement. The decision is effective from Dec 16.
Dennis Gartman, editor and publisher of "The Gartman Letter," said that while the move could perk up the currency in the short term, the country may regret the decision later.
"All this is is a temporary stem in the decline of the ruble," Gartman told CNBC Monday. "The problems that it's going to create for the Russian economy, for the Russian people and for Mr. Putin, [will be] very severe."
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