Bank of Russia Announces Improvements in Its Information Policy

On June 7, 2010 the Bank of Russia announced that improvements in its information policy will be made: from now on the Central Bank of the Russian Federation will disclose not only the data on the total volume of interventions to support the currency market but also on the volume of so-called purposeful interventions. 


It should be remembered that the volumes o purposeful interventions are not taken into account by the Bank of Russia when correcting the boundaries on the floating currency trading range and are defined taking into consideration the situation at the world markets of the main Russian export goods. In fact, the prices for oil maintaining at the current stable level or exceeding it, purposeful interventions are the only channel to form the monetary supply in the Russian Federation (as it was before the crisis). 

Deducing the volume of purposeful interventions from the total volume of interventions once can get the volume of interventions made in excess of the established volume. At the same time the RF Central Bank in its declaration officially state the rule for such interventions conduction: if the volume of non-planned interventions exceeds USD 700 million, the range of the allowed fluctuation of dollar-euro basket is corrected by 5 kopeks.

We hold that the increase in informational transparency and openness of the Bank of Russia policy can only be welcomed. Such measures increase the trust of economic agents to the monetary and credit policy of the RF Central Bank and contribute into its efficiency growth. However it should be noted that the mechanism of exchange rate policy conduction is fraught with serious dangers which are primarily connected with the return of the situation in monetary and credit policy to pre-crisis situation. In other words in case the foreign economic situation is changed the speculators at the currency market can quite confidently predict the behavior of the Bank of Russia when the ruble exchange rate reaches the boundaries of the floating range. Thus, in case the prices for energy carriers are growing, under the declared policy we will observe the growth of the monetary supply as a result of the Central Bank currency purchase and simultaneous ruble strengthening. In our opinion, the establishing of the rigid rule of exchange rate policy by the Bank of Russia is not wholly justified in the environment of high dependency of the Russian economy on the foreign economic situation. It seems purposeful to transfer to freer ruble floating, smoothing only sharp exchange rate fluctuations. 

P.V. Trunin, PhD, Head of Department of Monetary Policy