Russia Central Bank Eyes Inflation Targeting
By Ria Novosti
The Bank of Russia has ruled out a sharp devaluation of the Russian ruble in the near future and aims to target inflation in two years, the bank’s First Deputy Chairman Alexei Ulyukayev said in an interview with Izvestia daily newspaper on Thursday.
“A sharp devaluation of the ruble is impossible. There was a trading band with limited borders in 2008, so when we had reached a minimum level we started to buy hard currency and if we had reached a maximum level we sold it,” Ulyukayev told the paper.
“Now we have a more flexible trading band, without such rigidly defined borders and core operations are performed within the limits of these borders. This means that we do not give market players the opportunity to work out a strategy which plays the system.”
The Russian central bank will widen the trading band incrementally and may scrap its borders within the next two years, he said.
“Theoretically there should be no borders [in the band]; a time will come when the borders disappear. It will be good to implement this idea in two years, when we should complete a transfer to targeting inflation,” Ulyukayev said.
Ulyukayev forecasts capital outflow at $40 billion for the whole of this year, falling to zero in the second half of this year.
“We see a gradual reduction of the outflow. There is likely to be no capital outflow in the second half and the shortfall … [of about $40 billion] for the first half will be our annual result,” he said, adding the situation could change due to the instability in global markets.
Capital outflow from Russia in the second quarter of 2012 slowed down to $9.5 billion, compared with $33.9 billion in the first three months of this year, according to the bank’s preliminary estimates.
