The Bank of Russia reduces its interference on the currency market
From 13 October, the Bank of Russia increased the ruble-denominated operative interval for the currency basket from 3 to 4 Rb, while symmetrically decreasing the accrued value for interventions resulting in corridor shifts by 5 kopecks from 700 to 650 mln USD.
Besides, the RF CB abolished the fixed ruble-denominated corridor margins for the currency basket (26 and 41 Rb) that were established on 23 January 2009.
Thus, by taking this step the RF CB demonstrated its preparedness to gradually give up its interfering with the situation on the currency market and to carry out a switchover to the ruble’s free floating. At the same time, the Bank of Russia intends to continue its measures designed to smooth over any excessive exchange rate fluctuations. This development, in our opinion, is a welcome one because it would be a very difficult task to sustain the ruble’s stable exchange rate while simultaneously attempting inflation targeting in a situation of free capital movement.
We believe that it would be worthwhile for the Bank of Russia to further play down its operations on the currency market. However it should be remembered that the RF CB is interfering less in the activity on the currency market in face of a stable situation thereon. But there exist some fears that, in case of an emergence of a stable trend towards the national currency’s strengthening or weakening, the Bank of Russia may once again reverse to exchange rate targeting, thus eliminating all positive effects of its inflation targeting by means of interest rates.
P.V. Trunin – Candidate of Economic Sciences, Head of the Department for Monetary Policy