The Central Bank tripled its main interest rate to a whopping 150 percent Wednesday in a drastic bid to halt the massive sell-offs and sharp declines in Russia's financial markets.
Amid growing signs of financial panic, the head of the Communist Party declared that Russia is on the verge of collapse and needs early presidential elections."You've come here at the height of national catastrophe," Gennady Zyuganov told members of the International Press Institute on the third and last day of its gathering in Moscow.
President Boris Yeltsin's government has been trying to calm jittery markets in recent days, but to little avail. Foreign and domestic investors have been fleeing the Russian market in droves.
"Certainly Russians are panicking, selling anything they can," said Martin Diggle, head of trading at Brunswick Warburg brokerage in Moscow. "The market is all one way at this point."
Speculation is growing that Russia will need a rescue package from the International Monetary Fund, similar to the ones arranged after Asia's financial crisis hit last year.
The Central Bank said its benchmark interest rate, the refinancing rate, was being raised to 150 percent from 50 percent, effective immediately.
The announcement came as Russian stocks tumbled again Wednesday, down more than 7 percent in early trading. The Russia Trading System is down more than 50 percent on the year, making it the worst performing market in the world.
The ruble was relatively stable Wednesday, a lingering effect of heavy Central Bank intervention, estimated at $400 million on Tuesday alone.
A decade of economic turmoil has impoverished millions of Russians, and a new round of price increases will test the patience of the country's 147 million citizens.
Zyuganov blamed the crisis on Yeltsin's free-market reforms.