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Russia's central bank raises key interest rate to 7.5%

People walk under a chain of currency exchange offices in central Moscow on January 27, 2014

Russia's central bank said on Friday it had raised its key interest rate to 7.5 percent from 7.0 percent to dampen inflationary pressures amid the conflict in Ukraine.

The Bank Rossii "took the decision to raise the key interest rate up to 7.5 percent due to the growing inflationary risks," it said in a statement.

This means that the key rate has risen by a total of two percentage points since the crisis over Ukraine became acute.

The bank said the risk of inflation climbing above 5.0 percent by the end of 2014 had "risen significantly."

"In the Bank Rossii's judgement, the decision taken will enable inflation to slow down to a level not above 6.0 percent by the end of 2014," the statement said.

The bank did not refer specifically to Ukraine, but referred to "the uncertainty of the international political situation," which it said was "having a negative effect on the dynamic of production and investments."

The announcement came after Standard & Poor's ratings agency lowered its notation for Russia from BBB to BBB-, citing the risk of capital flight as investors take fear over the Ukrainian crisis.

Russia had raised its key interest rate from 5.50 percent to 7.0 percent on March 2 as Russian forces took control of Crimea in a standoff that has grown into the most serious conflict between Moscow and the West since the Cold War.