The ruble slips into negative territory and Russian stocks plunge despite an emergency 6.5% rate hike overnight - with investors asking: what next for Russia's beleaguered central bank? Joel Flynn reports.
Christmas markets glisten in Moscow - but behind the festive lights, an economy growing ever darker. Many here watching exchange rate boards track the Russian rouble's tumble. Outside the calm on the city's streets, economic ease quickly evaporating. Growing alarm at capital flight from the country, and now a drastic move from Russia's central bank to try and stabilise the currency. Hiking interest rates by 6.5 percent had seen an initial rally for the rouble, but a turn in the tide has since seen it in freefall. It's now plunged to against the dollar and euro in the biggest falls seen since 1998 - prompting talk of a full-blown currency crisis. Russia's Central Bank governor, Elvira Nabiullina. SOUNDBITE: Russian Central Bank Governor Elvira Nabiullina, saying (Russian): "Without any doubt, the situation is very difficult and it needs absolute coordination in action from the government and the central bank - coordinated action we are ready for." Some talk that capital controls could be on the table - a big fear for traders. But the huge fall in oil prices is making things worse - oil and gas provide half of Russia's fiscal revenue. The prospect of a oil dipping below 60 dollars a barrel adding to the potential for a so-called "perfect storm" - along with a looming recession and painful Western sanctions resulting from Russian involvement in the crisis in Ukraine. Consensus among many that the solution to this may not be economic or monetary. Berenberg Bank's Christian Schulz. SOUNDBITE: Berenberg Bank senior economist, Christian Schulz, saying (English): "Behind all of this besides the oil price is of course that Russia is still hit by the sanctions from the West. Only if Russia makes political steps to ease that pressure for instance by agreeing to a more permanent ceasefire in Ukraine and stopping, or maybe at least not increasing the support to the separatists there, I do see a chance that Russia will get out of this." Little signs on the streets of anger at Vladimir Putin though. Pockets of protest like this one last last week blaming everyone else - from banks to the West. Putin's popularity is still sky high among a public that gets most of its news from his state sponsored media - especially since his move to annex Crimea from Ukraine in March. But as the middle class support bases of financial stability and prosperity are increasingly threatened by capital flight, he too may be running out of time.