The increased purchases of foreign currencies by the Bank of Russia in October

Thus, the RF Central Bank the RF once again undertook some active interventions on the currency market by purchasing foreign currency in order to prevent a too rapid strengthening of the ruble’s exchange rate. A substantially higher foreign currency supply was the consequence of growth of prices for the main Russian export commodities (first of all, hydrocarbon prices),as well as of the renewed inflow of private capital in the Russian Federation resulting from stabilization of the global economy and the continuing considerable spread of interest rates both domestically and abroad.

It should be reminded that the Bank of Russia announced that it would gradually discontinue its managing the ruble’s exchange rate and would switch over instead to targeting the inflation rate. If the RF Central Bank has indeed elected to pursue such a policy, then its interventions on the currency market must be regarded as attempts to slow down the rate of the ruble’s strengthening, and not as control over the exchange rate. At the same time, in an event of these interventions being continued on a large scale, monetary policy will actually become the same as it was prior to the crisis. In other words, the Bank of Russia once again will be unable to exert any significant influence on the financial market by means of the instrument of interest rates.

P. V. Trunin – Candidate of Economic Sciences, Head of the Department for Monetary Policy