Russia on Monday announced that it would hike its key interest rate to 17 percent, effective Tuesday, citing rising devaluation and inflation risks.
The bank had raised the rate to 10.5 percent last week in an effort to stem a run on its currency.
"This decision is aimed at limiting substantially increased ruble depreciation risks and inflation risks,'' the central bank said in a statement. The decision is effective starting Dec 16.
Earlier on Monday, the Russian ruble saw its biggest drop against the dollar since 1998. It strengthened after the rate decision and was last trading at 62.50 rubles per dollar, compared to 65.50 before the announcement.
The announcement comes on the back of a plunge in the price of oil—Russia's main export and revenue source. The country also faces headwinds from Western sanctions over its conflicts with Ukraine.
Dennis Gartman, editor and publisher of "The Gartman Letter," said that while the move could perk up the currency in the short term, the country may regret the decision later.
"All it is is a temporary stem in the decline of the ruble," Gartman told CNBC Monday. "The problems that it's going to create for the Russian economy, for the Russian people and for Mr. Putin, [will be] very severe."
Gartman sees the ruble trading at 100 against the dollar soon. The currency has tumbled some 50 percent year-to-date.
"This is really extraordinary to watch," Gartman said. "I wouldn't be surprised at all if the Russians we selling gold, they have no choice. What else can they sell? They can't sell any crude oil anymore."
The Kremlin recently trimmed its growth forecast for 2015, predicting that the economy will sink into recession.
In September, the United States and the European Union imposed a new round of sanctions for Moscow's actions in Ukraine, which included blocking Western financial markets to key Russian companies and limiting imports of some technologies.
The additional sanctions were expected to cause enough pain to put Russia into recession for one or two years, predicted economist Alexei Kudrin, who served as finance minister under President Vladimir Putin for 11 years until 2011.
The potential for a prolonged downturn caused investors to pull their money from the capital, causing the ruble to further lose value.
The Associated Press contributed to this report.