Russia has more than doubled its key interest rate after the rouble slumped by 30% against the US dollar.
Bank of Russia said it raised the rate to 20% from 9.5% to help cushion the impact on prices of the rouble’s slide.
It came as the UK, along with the US and EU, cut off Russia’s banks from financial markets in the West.
Any UK entity is banned from undertaking transactions with Russia’s central bank, its finance ministry and its wealth fund.
“The UK government will immediately take all necessary steps to bring into effect restrictions to prohibit any UK natural or legal persons from undertaking financial transactions involving the Central Bank of Russia, the Russian National Wealth Fund, and the Ministry of Finance of the Russian Federation,” the government said.
The Russian currency hit a new record low after it emerged at the weekend that some of the country’s banks will be banned from using the Swift international payment system.
On Sunday, Russia’s central bank appealed for calm amid fears that there could be a run on the country’s banks.
Will Walker-Arnott, senior investment manager at Charles Stanley, told the BBC’s Today programme that “it looks like Russia is increasingly becoming an economic pariah, increasingly isolated from the global financial system”.
The growing tensions also helped to push the price of Brent crude oil above $100 (£75) a barrel.
The move by the European Union, United States and their allies to cut off a number of Russian banks from Swift is the harshest measure imposed to date on Moscow over the Ukraine conflict.
The assets of Russia’s central bank will also be frozen, limiting the country’s ability to access its overseas reserves.
The intention is to “further isolate Russia from the international financial system”, a joint statement said.
Russia is heavily reliant on the Swift system for its key oil and gas exports.
Investors were also wary on Monday after Vladimir Putin ordered Russia’s military to put its deterrence forces, which include nuclear weapons, on “special alert”.