The rate hike is intended to help control rising inflation, caused largely by the ruble`s sharp decline in value against the major currencies, the central bank said in a report. Further interest rate hikes may be expected, the report said.

As of Dec. 8, the rate of consumer price increases was 9.4 percent. Core inflation reached 8.9% in November. The report forecasts that inflation will have risen to 10 percent by the end of this year. In 2015 it is expected to exceed 10 percent.

The report also forecasts that Russia`s economic growth for this year will be flat, at 0.6 percent.

"During the next three-year period, economic growth will be lower than previously projected in the baseline scenario due to persistently lower oil prices. Annual GDP growth is expected to be close to zero in 2015-2016," the report says.

The report attributes the poor growth to "the considerable changes in external conditions." These include:

*Restricted access to international capital markets for Russian companies, due to Western sanctions.

*Low energy prices limit trade and revenue.

*Sharp fall in the value of the ruble.

As a result, fixed capital investments will continue to drop and consumption will remain weak, the report says.

The ruble, however, continued to lose value against major currencies despite the rate hike, dropping below 55 to the dollar for the first time.

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