REUTERS/Sergei KarpukhinPeople dressed as blocks of currency notes as part of a marketing campaign walk in Moscow."Raising rates up to 17% - that's the end of the banking system," an "emotional" senior manager of a mid-sized bank told Vedomosti on Tuesday.
Vedomosti is a Russian-language business publication that is a joint venture between Dow Jones, the Financial Times, and the publishing house Sanoma Independent Media.
"[The banker] gives an example: today, one of the major banks told one of the largest energy companies, that the bank wants to raise credit rates up to 19%," reports Vedomosti.
The banker continued to add that the economy can't function at these rates, and for the real sector (aka the non-finance, non-stock exchange sector) this is death, according to Vedomsti.
In the middle of the night on Tuesday (late Monday EST), the Russian Central Bank raised rates up to 17% from 10.5%. The bank's statement said that the decision was driven by the need to limit significant devaluation in the ruble and inflation risks.
In a sentence, it did not work.
The Russian currency fell to new lows, reaching 80 rubles to the dollar and 100 rubles to the euro on Tuesday. At first, it opened 8% stronger after the central bank's rate-hike.
"The interbank lending market died today, [the banker stated and] added: 'The first thing in the morning, everyone closed it - you can't give money to anyone right now,'" reports Vedomosti.
"Our [Federal Loan Obligations] portfolio dropped by 10% today, which pretty much erased our year long profits."