Russia Hikes Interest Rate to 17%

Russia's central bank hopes to slow inflation and stop further weakening of the ruble after hiking its key interest rate to 17% from 10.5% earlier today.

The rate has soared from 5.5% at the beginning of the year as the country's economy continues to weaken. The country has been battered by Western sanctions tied to the Ukraine crisis, eroding confidence in Russia's economic policies and slumping oil prices that hurt the company's primary export.

The ruble, which has plunged more than 45% against the U.S. dollar this year, sagged to a record-low 67 to the dollar last week. Tuesday's announcement triggered an immediate rally in the currency to 60 against the dollar.

Russia has spent more than €56 billion ($70 billion) this year in an unsuccessful effort to stabilize its currency. Economists note that raising interest rates will help slow the flow of money leaving the country but also is likely to further inhibit growth for Russia's already slumping economy.

The central bank warns the country's economy could shrink about 4.5% next year if oil prices remain near $60 per barrel. Oil and gas account for about two-thirds of Russia's exports.