29 Jun 2022 15:37

Drive to artificially return ruble rate to levels existing before new conditions carries risks of devaluation - Nabiullina

MOSCOW. June 29 (Interfax) - Attempts to return the ruble exchange rate to levels existing under the old economic conditions carry risks of devaluation, Central Bank of Russia (CBR) Governor Elvira Nabiullina said at the congress of the Russian Union of Industrialists and Entrepreneurs (RSPP).

"Attempts to return the exchange rate that existed under the old conditions it is an artificial course, which could then lead to a sharp devaluation, as we have already had," Nabiullina said.

Ruble exchange rate dynamics are being actively discussed in recent times, she said. "The exchange rate issue comes up, because when external conditions change, the rate changes. Yes, we stick to a policy of a floating rate, because a floating rate allows the economy to adapt to changing conditions," the CBR chief said.

She tried to explain why the ruble exchange rate cannot be managed now. Based on the experience of the 2000s, the regulator managed the nominal exchange rate, while the real exchange rate was still growing. "Either the nominal one should grow, or this turns into inflation, while the real exchange rate is the one important for business," Nabiullina said.

Besides, FX rate management greatly reduces the independence and autonomy of Russian monetary policy, she said. Pegging the ruble rate to the currencies of developed countries, which have been experiencing high inflation in recent decades, in fact, may lead to importing of inflation from these countries. "We are forced to synchronize our monetary policy with the policies of these countries," Nabiullina said.

Mechanisms for managing the exchange rate are limited, she said. One of them is the accumulation of reserves. "You now understand that we can't accumulate reserves in hard currencies, they are immediately arrested. Non-reserve currencies - there are capital restrictions," the CBR head said.

Currency restrictions are another mechanism, but their change from side to side is unfavorable for business, Nabiullina said. "I do not think that business will be happy with this, these are unpredictable conditions for business, if these currency restrictions move back and forth," the head of the regulator said.