Does The Central Bank of Russian Federation believe in ruble force?

On 21 October the Central Bank of Russian Federation cut the day volume of currency interventions by half – from 120 mln. USD to 60 mln. USD. In other words, the controller will allocate fewer funds for influence on a ruble exchange rate in case of its output from the given interventional corridors of a dual currency basket.

This decision seems to be rather logic continuation of the financial authority’s earlier solution as of 7 October. Then the Bank of Russia expanded boundaries of so-called "neutral range" from 1 RUB to 3,10 RUB. While the basket cost is 34,30-37,40 RUB, the Central Bank won’t make currency interventions in one direction or another.

Thus, new exchange rate policy of mega controller led by recently appointed Elvira Nabiullina, is going to appear. The policy is probably directed on gradual implementation of national currency freely floating rate. However, in long-term perspective, actions made by the Central Bank, in case of current economy structure, can lead to a weakening of the ruble.

Today, while the growth of industry production is about zero values, the state and private debt is increasing and country’s financial position is still largely determined by raw materials prices, such steps of Russian Bank seem to be rather optimistic. On the other hand, the Central Bank, seeing the deterioration of country’s economic situation, may reasonably carry out such practice in life. After all in case of currency intervention reducing and expanding of the "neutral range", the controller will save the part of its forex holdings, which maintenance at "due level" is, if not the primary, but very important task for financial authorities.