23 Dec 2010 12:30

Ruble volatility in 2011 will be as in 2010, forex corridor may widen - Ignatyev

MOSCOW. Dec 23 (Interfax) - Volatility in the Russian ruble exchange rate next year will be about the same at it was this year, and next year's currency corridor may be widened, Central Bank of Russia Chairman Sergei Ignatyev.

"Volatility will be roughly what it as in 2010. Maybe even more, because we've widened the currency corridor and eased the conditions for it to move," Ignatyev said in an interview with the business daily Kommersant, noting, "It's totally possible we will decide next year to widen the corridor further."

Ignatyev said that where he had previously said the exchange rate that triggered Central Bank unease was 30 rubles/$1, now "I would not speak so definitively about a threshold at which ruble strengthening would make us start to worry."

The Central Bank chief went on to say that 6%-7% inflation in 2011 is a fully achievable goal. In previous years, he said, the Bank had taken upon itself the "soft" responsibility not to let the real effective exchange rate rise above a determined percentage. This obligation hobbled the regulator in the achievement of inflationary goals, Ignatyev said. "We are not assuming that responsibility now. Now we don't have any guideposts for the nominal ruble rate or for the real rate either," he said. "A mechanism for a 'floating' currency corridor has the goal only of restricting abrupt exchange rate fluctuation."

If in 2011-2013 there are no sharp budget-spending increases over the expenditure plan, then the inflation levels planned for those years - 6%-7% in 2011, 5%-6% in 2012, and 5.5% in 2013 - will be achievable targets, Ignatyev said.

"I don't say that I guarantee this, because there are a bunch of other circumstances that influence inflation," he said. The grain prices continuing to rise rapidly is a matter of concern, he said. "In just the period from the start of October to the beginning of December, class-three wheat prices increased 17%, naturally, this can not help but be reflected in prices for bread, macaroni, and certainly on all products of animal husbandry," he said. "I very much hope that regular grain sales out of the Intervention Fund will begin in the next few weeks. This fund has roughly ten million tonnes, and so far it's almost not been touched," he said. It is important some of those sales be carried out via exchanges at market prices, he added.

If inflation starts to quicken, "the Central Bank will have to raise interest rates, increase the norm for mandatory provisions, and this will slow the dynamics of the monetary supply, slow the growth of lending, and in the short-term period could have a negative impact on economic growth," the Central Bank chairman said.