Ruble exchange rate should not pose significant inflation risks in coming months - Central Bank rate discussion summary

MOSCOW. Nov 6 (Interfax) - The ruble's exchange rate should not pose significant inflation risks in the coming months, barring any significant external shocks, the Central Bank of Russia said in a summary of its key rate discussion.

"The ruble's appreciation since the beginning of the year has already been largely reflected in prices. It was mentioned that companies are factoring a weaker exchange rate than at present into their business plans. Barring any significant external shocks, exchange rate dynamics should not pose significant inflation risks in the coming months," the CBR said.

Discussants attributed the ruble's appreciation in the second half of September and October, following its depreciation in August and early September, to the end of one-off and seasonal factors, for example foreign currency supply increased in October after declining in previous months as exporters accumulated it to repay FX loans.

Discussants said the ruble's appreciation this year was to be expected in view of tight monetary policy: high interest rates curb demand for imports and make ruble savings more appealing, while simultaneously a number of factors are likely to be making the ruble fundamentally stronger. Firstly, import restrictions-both external and internal (import duties, protectionist barriers, localization requirements in the public sector)-are reducing demand for imported goods and the foreign currency to purchase them. Secondly, there is lower demand for foreign assets from residents amid sanctions restrictions. Thirdly, the sale of foreign currency from the National Wealth Fund to finance the budget deficit and investment projects also contributes to the ruble's strengthening. Discussants said the stronger ruble this year had contributed to disinflation.