The Bank of Russia does not see any risks to the country's financial stability from a stronger ruble, and it will remain focused on curbing inflation, CBR first deputy chairwoman Ksenia Yudaeva claimed.
A capital inflow from investors who try to turn an extra profit on higher interest rates cannot be regarded as a main factor behind ruble appreciation, Yudaeva said in an interview to Bloomberg. Among other factors she pointed to possible higher currency sales on the part of exporters and the return of seasonality factors.
The Bank of Russia, according to her, does not see any risks to financial stability in the performance of the ruble. "If there is indeed any deviation from certain estimated fundamentals, it looks normal. We'll react to inflation, watch for inflationary trends and build our policy on this basis. The currency exchange rate is floating in Russia, this policy has proven its efficiency, and we proceed from this," said Yudaeva.
"Things look quite stable. It is important for us to stick to quite tight policy in order to attain the goal, to hold it and to anchor inflationary expectations at a much lower level over time," she added.
The regulator's official emphasized that the Bank of Russia slowed down rate cuts because the Finance Ministry's currency operations began. "If not for these currency purchases, the inflation rate could have decelerated faster…As a result, we have slowed down monetary easing," she said.
At its first board meeting in 2017 the Bank of Russia decided to hold the 10% interest rate steady, and tightened its rhetoric, claiming there is less room for rate cuts in the first half of 2017. The regulator pointed out that the Finance Ministry's planned currency purchases in the market will not lead to any substantial inflation risks, but require further moderate monetary policy to attain the 4% inflation target by end 2017.
Ksenia Yudaeva noted that the latest revision of GDP data for 2015 pointed to a much shorter period of recession and showed that the regulator's tight policy does not prevent the economy from growing. In early February 2017, the Federal State Statistics Service revised up for the second time its 2015 forecast for a GDP decrease to -2.8% from -3%. The statistical authority first revised the estimate in late 2016 (from -3.7% to -3%). "This means to what an extent our cautious approach last year was justified," Yudaeva claimed, adding that faster economic recovery bears risks to inflation.
