S&P Cuts Russia’s Credit Rating to “Junk”

Russia's credit rating has been dropped below investment grade by New York City-based Standard & Poor's Ratings Services.

The agency last downgraded Russian credit in April and cautioned that further cuts may follow. This is the first time in more than a decade that S&P dropped its Russia rating into junk territory.

The move, which had been expected by financial markets, further weakened the ruble. The currency has fallen in value by about 50% in the past seven months, thereby hiking inflation, pushing interest rates higher and leading the country to the brink of recession.

S&P says its latest downgrade was prompted by evidence the country's "monetary policy flexibility has become more limited." It predicts Russia's economy will expand an average 0.5% per year through 2018, about one-fifth its rate in recent years.

Finance Minister Anton Siluanov claims S&P has "dramatized" Russia's situation, asserting the agency's action was driven by "excessive pessimism." He contends the downgrade will have little impact on investors, who have already accounted for the risks of a rating downgrade.

But analysts say the other two major U.S. rating agencies, Fitch Rating and Moody's Investors Service, are likely to make similar downgrades