13 Aug 2018 11:04

Aug weakening of ruble could add 0.5 pp to inflation, but it will stay within target - minister

MOSCOW. Aug 13 (Interfax) - If the ruble stays down after its recent weakening on the announcement of possible new U.S. sanctions against Russia, this could add 0.5 percentage points to inflation in the country, but there is no risk of it spiking, First Deputy Prime Minister and Finance Minister Anton Siluanov said.

"The latest sanction initiatives that we're talking about today have already led to the ruble weakening. In the last few days the weakening amounted to about 4%. We see that this could affect inflation, although inflation today is at low levels like never before. If we take annual inflation, the dynamic amounts to 2.5%. Our target is 4%. In other words, in principle, there is a safety cushion," Siluanov said in an interview on the show Sunday Evening with Vladimir Solovyov.

"How will the change in the exchange rate affect inflation? I want to say right away that, considering that we have realigned our market toward domestic production - particularly consumer goods have become more Russian-produced rather than imported - the influence of the change in exchange rate on consumer goods is far smaller today than it was yesterday," Siluanov said.

"Nonetheless, it's possible, if the exchange rates remain. Then we estimate the contribution to inflation at about 0.5 percentage points. Ultimately, [inflation] could increase to 3%, perhaps a little more, [but] inflation will still remain within the corridor that the government and Central Bank determined. We don't see risks of inflation spikes here. Inflation is under control," Siluanov said.

Speaking about the depreciation of the ruble and the response of the authorities, he said: "The ruble's exchange rate changed, we and the Central Bank took action against the weakening of the ruble - we stopped buying forex for reserves, since the government is now buying forex for the National Welfare Fund. This reduces pressure on the weakening of the ruble's exchange rate."

"We will continue to use this instrument depending on the situation on the financial market. In any case, we have already gone through several such attacks on the financial market and we have instruments to respond," Siluanov said.