Russia Rate Cut Among Most Abrupt U-Turns Since Black Wednesday

(Bloomberg) — Russia’s unexpected cut in its benchmark interest rate on Friday, just six weeks after raising borrowing costs, ranks among the quickest U-turns by a central bank in recent decades and is the latest in a string of surprises by policy makers around the globe, from Canada to Switzerland.

Here’s a guide to some of the most abrupt policy reversals by major central banks since 1990:

• Bank of England: On Sept. 16, 1992, with the pound under pressure from George Soros and others, the central bank raised its key rate to 12 percent from 10 percent, then announced a second increase to 15 percent. That still wasn’t enough to protect the currency, and by the evening of that same day, which became known as “Black Wednesday,” the government withdrew from Europe’s system of linked exchange rates and canceled the second rate increase. The next day, rates fell back to 10 percent.

In 1999, the BOE unexpectedly raised interest rates in September as global growth picked up, following seven cuts within a year, including one about three months earlier.

• European Central Bank: Policy makers underestimated the severity of the financial and sovereign-debt crises. In July 2008, they raised the benchmark rate by a quarter-point to 4.25 percent to counter rising inflation, only to cut by a half-point three months later in a move coordinated with other central banks.

In 2011, the ECB raised rates twice, in April and July, again to counter the risk of higher inflation, then cut in November in Mario Draghi’s first meeting as president as the sovereign-debt crisis weighed on the economy.

• Bank of Canada: While the central bank’s Jan. 21 quarter- point cut was unexpected and the first change since 2010, policy makers had a rapid about-face in September 1998 when they lowered rates by a quarter-point to support economic growth, just a month after a 1-point increase.

• Swiss National Bank: Policy makers roiled markets by announcing on Jan. 15 an end to the franc’s exchange-rate ceiling against the euro. The action occurred a mere three days after central bank Vice President Jean-Pierre Danthine called the franc cap a “pillar” of monetary policy.

• Federal Reserve: In April 2011, then-Chairman Ben S. Bernanke said the need to contain inflation meant further easing was unlikely on top of already-record monetary stimulus. Less than four months later, with growth flagging, officials pledged to hold their key interest rate near zero until mid-2013, then in September took an action dubbed “Operation Twist” to lower long-term rates by lengthening the maturity of securities in the Fed’s portfolio.

• Central Bank of Russia: Friday’s cut in the benchmark interest rate by two percentage points to 15 percent, following December’s 6.5-point increase, pales in comparison with the swings ahead of the country’s debt default in August 1998.

During that year, the main rate increased by 20 points to 50 percent on May 19, where it stayed for about a week before a surge to 150 percent that lasted for about another week. The rate then fell to 60 percent on June 5, rose to 80 percent on June 29 and then went back down to 60 percent on July 24, where it held until the following June.

• Banco Central do Brasil: Brazil’s central bank cut its benchmark interest rate by a half percentage-point on Aug. 31, 2011, after raising borrowing costs at its five previous meetings, including just six weeks earlier. The bank’s board cited risks in the global economy, even amid the fastest inflation in six years.

–With assistance from Jennifer Ryan and Fergal O’Brien in London.

To contact the reporter on this story: Scott Lanman in Washington at [e-mail] To contact the editors responsible for this story: Chris Wellisz at [e-mail] Mark Rohner