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Russia's central bank raised its benchmark interest rate the most since the nation's 1998 default, making the announcement in the middle of the night in Moscow as policy makers seek to douse investor panic and stem a ruble rout.

The central bank increased the key rate to 17 per cent from 10.5 per cent effective today, it said in a statement on its website. Policy makers gathered for an unscheduled meeting after a one-point increase on Dec. 11.

"This decision is aimed at limiting substantially increased ruble depreciation risks and inflation risks," the bank said in the statement.

Russia's central bank raised interest rates for the sixth time in 2014 after more than $80-billion spent from its reserves failed to stop a 49 per cent selloff of the ruble, the world's worst-performing currency this year. President Vladimir Putin, whose incursion into Ukraine's Crimea peninsula in March prompted the U.S. and its allies to strike back with sanctions, this month called for "harsh" measures to deter currency speculators.

"While such drastic tightening measures will inflict more pain on the economy, we have been arguing for a while that it is not about preventing recession, but a full-scale financial turmoil caused by the precipitous ruble fall," said Piotr Matys, a currency strategist at Rabobank International in London.

Ruble Drop The ruble yesterday tumbled past 60 for the first time on record, losing 9.7 per cent to 64.4455 a dollar. That extended its plunge this year to 49 per cent, which overtook the Ukrainian hryvnia's drop. Brent, the grade of oil traders look at for pricing Russia's main export blend, slipped 79 cents, or 1.3 per cent, to end the session at $61.06 a barrel on the London– based ICE Futures Europe exchange.

Russia derives about 50 per cent of its budget revenue from oil and natural gas taxes. As much as a quarter of gross domestic product is linked to the energy industry, Moody's Investors Service estimated in a Dec. 9 report.

The economy may shrink 4.5 per cent to 4.7 per cent next year, the most since 2009, if oil averages $60 a barrel under a "stress scenario," the central bank said yesterday. Net capital outflow may reach $134-billion this year, more than double last year's total.