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Russian top banker urges business to learn to live with weak ruble

December 16, 2014, 18:11 UTC+3 MOSCOW
The ruble weakening is a signal for the Russian economy to adapt to new conditions, Russian Central Bank Chief Elvira Nabiullina says
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Russian Central Bank Chief Elvira Nabiullina

Russian Central Bank Chief Elvira Nabiullina

© EPA/CHRIS KLEPONIS

MOSCOW, December 16. /TASS/. Russian Central Bank Chief Elvira Nabiullina urged Russian business on Tuesday to learn to live in new realities with a weak ruble as the regulator’s decision to hike the key rate to stem the ruble’s devaluation will not yield quick results.

“The ruble weakening is a signal for the Russian economy to adapt to new conditions. We really need to learn to live in a ruble zone and increasingly rely on our own sources of financing,” Nabiullina said.

Russia’s Central Bank suddenly raised the key rate early on Tuesday by 6.5 percentage points to 17% in an attempt to halt the ruble’s devaluation.

Many market participants expected a sharp rate increase at the Central Bank’s interest rate policy meeting on December 11 but the regulator increased the main lending rate by just one percentage point to 10.5% The market shrugged off the regulator’s decision and the ruble continued its free fall.

Nabiullina said no immediate effect should be expected from the sharp rate increase this time as well.

“I want to stress that the key rate increase is primarily aimed at curbing inflationary expectations. There will indirect influence on the currency market. Perhaps, it will not be instant,” the Central Bank chief said.

The Russian currency market showed no response to Nabiullina’s statement. After the rate decision, the ruble strengthened against the dollar and the euro but resumed its steep fall afterwards.

The Central Bank head said the ruble was falling under the impact of external factors.

“The ruble is currently undervalued by all fundamental factors and certain time is needed for it to come close to the fundamental value,” she said, promising to better explain the Central Bank’s policy.

Last week, Nabiullina said the ruble was 10-20% undervalued.

The Central Bank chief said the rate hike would lead to an increase in interest rates on deposits at Russian commercial banks, making them more attractive for depositors while the ruble weakening would create opportunities for the development of domestic production and the creation of jobs.

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