Economic growth in the country will be close to zero in 2015-16, according to the CBR, and inflation could hit 10 percent in the first three months of 2015, heightening the pressure on Russian consumers.
Read MorePutin set to scare away investment in 2015
The currency's slide comes on the back on a sharp decline in the price of oil – Russia's main export and revenue source. The country's central bank has hiked interest rates throughout the year in an attempt to bolster the country's struggling economy, which – along with falling commodity prices – is battling sanctions from the West and subsequent capital outflows.
Read MoreAs ruble tumbles,what will Putin do next?
There are growing concerns about the strength of the economy, and on Tuesday the World Bank revised down Russia's growth projections for 2015/2016. It now predicts that the Russian economy will contract by 0.7 percent in 2015, amid continued volatility in oil prices.
Timothy Ash, head of emerging markets research at Standard Bank, said the Russian rate rise reminded him of Turkey, which delivered a massive hike in interest rates in January to defend its currency.
"The central bank (is) lagging behind the curve, and (is) likely to be forced by the market into an even larger rate hike to eventually stop the rot," Ash said in a note.
Read MoreTurkey delivers massive rate hike to defend lira