Rouble recovers slightly but relief from rate rise looks temporary

Rouble recovers slightly:  By 10:50 am GMT on December 16, the rouble had begun to recover again and was trading  at 65.8  to the US dollar after bottoming out at 68.1 earlier in the day as the Central Bank of Russia’s (CBR) decision to raise the interest rate  from 10.5% to 17% appeared to have provide some respite which is now beginning to look only temporary. The CBR felt compelled to intervene so dramatically after its own calculations suggested that the economy would contract in the first quarter of next year and perhaps by around 4.5% in 2015 as a whole if oil prices were to  end up averaging $60 a barrel  (Brent for January delivery LCOc1 was selling for $59.75 a barrel at 0750 GMT  16/12/14)). Oil and gas energy sales represents two thirds of the country’s exports  and without them, Russia would have a massive deficit on its trade and financial dealings with the rest of the world. The raise was intended to stem a major outflow of capital which which the CBR fears could be as much as $120 billion next year, $75 billion in 2016 and $55 billion in 2017. BBC, The Moscow Times