The Russian Central Bank raised their key interest rate to 20% in the midst of economic sanctions in response to the invasion of Ukraine. In the United States, the key interest rate, as far as I understand, is the interest rate at which banks borrow from the Federal Reserve to keep their reserves at the required level. But I've read that there are two key interest rates, this discount rate and the federal funds rate. I see the term "key interest rate" used so loosely in news articles and often interchangeably with other rates; it's confusing.
- What do they mean when they talk about the Russian Central Bank's "key interest rate"? What rate is this exactly?
- And how does raising it so high protect the ruble or the Russian economy?