The real effective RUR rate downgrading against USD has amounted to 5.6% in January - September 2009

During the acute phase of the crisis in November 2008 - February 2009, characterized by massive capital outflow and a continuous decrease in energy sources prices, the Bank of Russia has allowed a smooth ruble depreciation to the two-currency currency basket.

In the situation of significant reduction of foreign currency inflow to the country the sustainability of the same rate could be achieved only for a limited period of time due to foreign currency and gold reserves. As a result, in general, the real effective ruble exchange rate fell down by 16.3% within December 2008 - February 2009. However, due to the stabilization of the of Russian and global financial markets, that occurred in spring, followed by an upsurge in energy prices, the real effective ruble exchange rate began to grow again, having gained back in October 2009 more than 40% of the value lost due to depreciation.

Therefore, the monetary policy pursued by the Bank of Russia during the crisis, in general was restraining the exchange rate fluctuations without creating obstacles to its fundamental changes. Departure from policy was a smooth depreciation in the acute phase of the crisis, which has demanded considerable scope of the RF CB foreign currency assets. In the medium term the Bank of Russia intends to follow the same policy.

However, it is worth to note that in the event of further growth in energy sources prices and a large capital inflow, RUR will experience a significant upward pressure, and the Central Bank of Russia may again start to buy foreign currency to restrain RUR growth. In this case, monetary and credit policy will actually be the same as before the crisis, which may again result in the emergence of bubbles in financial markets, if government authorities fail to create supplementary mechanisms of the excessive monetary supply sterilization.

P.V. Trunin, PhD, Head of Laboratory of monetary and credit policy