The Central Bank and the government entered into a clinch due to the fall of the ruble

The dollar continues to update one and a half year highs. On the Moscow Exchange, he broke through the mark of 101 rubles for the first time since March 23, 2022. The euro does not lag behind: its rate has reached 110 rubles. The yuan rose to 13.8 rubles, and this is not the limit. Maxim Oreshkin, assistant to the president and former head of the Ministry of Economic Development, considers the soft monetary policy of the Central Bank of the Russian Federation to be the main reason for such a strengthening of the dollar. Whether criticism of the regulator is justified and what it can do to stabilize the ruble, MK understood.

Judging by the claims made public by Oreshkin, he believes that the main reason for the weakening of the ruble and the acceleration of inflation is the soft monetary policy of the Bank of Russia, that is, the insufficiently high key rate.

At the July meeting of the Board of Directors of the Central Bank of the Russian Federation, it was decided to increase this important indicator by 1% at once, to 8.5%. However, even such a decision was not understood by all the “powerful of this world”. Recall that on the eve of the July meeting of the Board of Directors of the Central Bank of the Russian Federation, in the State Duma, for example, they demanded not to raise the key rate. However, the regulator acted within the framework of its strategy and, as the claims of the presidential aide show, on the contrary, it was not tough enough.

Oreshkin stressed that the weakening of the ruble complicates the restructuring of business and has a bad effect on the incomes of Russians. “It is in the interests of the Russian economy to have a strong ruble,” he said. The assistant to the president is confident that the regulator has all the necessary tools to normalize the situation in the near future and “ensure the reduction in lending rates to sustainable levels.”

According to Natalya Milchakova, a leading analyst at Freedom Finance Global, before the key rate increase in July, it was impossible to say that the Central Bank of the Russian Federation took any significant measures to strengthen the ruble. And the July increase in the key indicator, although by 1% at once, was not initially aimed at strengthening the ruble, but rather at combating accelerating inflation.

On the contrary, in early August, both the Ministry of Finance and the Central Bank of the Russian Federation announced the resumption of purchases of foreign currency in the NWF, although after the ruble accelerated its decline, the regulator announced that it was suspending these operations until the end of the year.

Exporters and the state budget benefit from a weak ruble. But, on the other hand, the weaker the ruble, the faster inflation accelerates, and it turns out that, without restraining the fall of the ruble, the regulator cannot effectively fight inflation by raising the key rate alone. Yes, and the Russian economy is developing now, primarily due to growth in the manufacturing industry, and most industries in this sector work for the domestic market, and not for export. This means that a weak ruble is unprofitable for large businesses that are focused on the Russian market.

Alexei Zabotkin, Deputy Chairman of the Board of the Bank of Russia, commenting on the ruble exchange rate on August 11, adhered to the opposite point of view than Oreshkin, insisting: “The decisive factor is what happens in terms of exports and imports of goods and services.”

As the head of the analytical department of the BKF Bank Maxim Osadchiy pointed out, in the end, according to the Central Bank of the Russian Federation, the main reason for the weakening of the ruble lies in the economy, and not in monetary policy. This is understandable: Oreshkin is in charge of the economy, and Zabotkin is in charge of monetary policy.

Back in 2014, the Central Bank of the Russian Federation allowed the ruble to float freely: it switched from a policy of controlled “floating of the ruble in the corridor” to an inflation targeting policy. “As a result, inflation (at least the official one) is low, and the devaluation of the ruble is going through the roof,” added Osadchy. “Perhaps we need to move from a clearly unjustified inflation targeting policy to a monetary policy rule that takes into account both inflation and devaluation.”

To stop the collapse of the ruble, it is necessary to raise the key rate not by one percentage point, as was done on July 21, but by several points at once. For example, the collapse of the ruble was stopped on February 28, 2022 by raising the rate from 9.5% to 20% (at the same time, the Central Bank introduced severe restrictions on foreign exchange transactions in early March). The collapse of the ruble in December 2014 was stopped by a two-step increase in the key rate from 9.5% to 17%. “It is possible that now the Central Bank of the Russian Federation will be forced to sharply raise the key rate,” the analyst concludes.

According to the expert of IC “IVA Partners” Artyom Shakhurin, a significant part of the depreciation of the ruble is due to the withdrawal of funds by foreign investors and partly by Russians, who still have such an opportunity.

Accordingly, if the Central Bank of the Russian Federation sharply limits such opportunities and tightens currency controls, the pressure on the ruble will decrease. The 1% increase in the rate and the refusal to buy gold and yuan in the NWF could not significantly affect the exchange rate of the ruble against the dollar, since these factors are not significant for those who withdraw the currency from Russia.

According to BitRiver financial analyst Vladislav Antonov, if we rely on technical analysis, then the ruble may further weaken to the zone of 104-105 rubles per dollar and up to 113 rubles per euro. If there are no actions from the side of the Central Bank of the Russian Federation, then after 113 rubles, the euro will move to the level of 119 rubles, the expert is sure.

PS When this material was already written, the Central Bank announced an extraordinary meeting of the Board of Directors at the key rate, it will be raised. After this news, the dollar fell just below 100 rubles.

Read the material “The ruble is sinking” with a smile “: the political consequences of the anti-record of the national currency”