Investing.com - The Central Bank of Russia unexpectedly hiked its benchmark interest rate on Monday, as the ruble dropped to an all-time low against the euro-dollar basket amid heightened tensions in Ukraine.
Russia's central bank said it was raising the benchmark interest rate by 150 basis points to 7% from 5.5%.
Following the announcement, the ruble remained lower against the U.S. dollar and the euro, with USD/RUB up 1.19% to trade at 36.44 and EUR/RUB rising 0.78% to 50.18.
Meanwhile, Russia's main stock index, the Micex, plunged by 10% Monday morning.
“The decision is meant to avoid emerging risks to inflation and financial stability associated with the recently seen increased volatility on the financial markets," the central bank said in a statement.
Geopolitical tensions mounted over the weekend after Ukrainian Prime Minister Arseniy Yatsenyuk said Sunday that his country was "on the brink of disaster" after Russia's parliament authorized President Vladimir Putin to use military force in Ukraine.
Ukraine has put its forces on combat readiness and U.S. President Barack Obama warned Russia not to intervene. The U.S. is also considering imposing sanctions, Secretary of State John Kerry said Sunday.