Ignatyev: free floating ruble entails risk; Central Bank must retain smoothing mechanisms
MOSCOW. Feb 20 (Interfax) - Because a freely floating exchange rate entails certain risks, the Central Bank must retain mechanisms for smoothing excess volatility on the currency market, Central Bank Chairman Sergei Ignatyev said.
"Proceeding from pure theory, [after completing the transition to inflation targeting] the Central Bank should take upon itself the responsibility not to conduct currency interventions and the currency exchange rate will be absolutely free," Ignatyev said in the Federation Council on Wednesday.
However, given the Russian economy's dependence on the price of oil and its extensive involvement in the global financial system, "such a transition to an absolutely free-floating rate could lead to excessive volatility in the currency rates," Ignatyev said.
"Perhaps, some sort of mechanisms for smoothing currency rates must be retained, to the extent that this does not run counter to the inflation goals," he said.
