Central Bank pumps cash into system to fend off credit crunch
The Central Bank pumped a record $13 Billion into banks on Friday, as it battles the spread of the liquidity crisis to Russia. With stocks hitting a 2-year low this week, Russia's economic woes are deepening. Experts warn it might take 2 years before the
Borrowing by Russian firms in August collapsed 80%, as Western banks closed credit lines to cover bad debts. To keep the economy liquid the Central Bank released more billions on Friday. Its head pledged to keep drawing from Russia's $570 billion reserves. Sergey Ignatiev, Chairman of the Central Bank of Russia says it has plenty of capacity to continue doing so.
“We have the capacity to ramp up this process several times over. So there's no cause for concern.”
Russia's stock exchange RTS rallied 3% on Friday after losing 20% since September. Experts say the market will recover those losses, but not soon, with Ronald P. Smith, Chief Strategist at Alfa-Bank saying it could take up to 2 years.
“The full recovery will take somewhere between 18 and 24 months. Our full valuation is roughly around 2,900-3,000 points on the RTS, in other words double from here.”
The trouble is rival emerging markets are also in the dumps. That leaves investors with little choice but to ride the storm, and hope for better days.