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Experts: Russians should wait until ruble volatility gives way to stable rate

August 25, 2015, 16:56 UTC+3 Alexandrova Lyudmila
© AP Photo/Alexander Zemlianichenko

MOSCOW, August 25. /TASS/. The ruble’s free-fall is no disaster for the economy or households, analysts say. The ruble led the fall in emerging market currencies on Monday. During the day, the euro was observed to rise above the level of 83 rubles while the US dollar hit 70.9 rubles as of 7:00 p.m. Moscow time. The Russian currency has managed to strengthen slightly against the dollar and the euro. The ruble’s collapse caused no noticeable reaction from the government.

"In order to influence the ruble exchange rate, the Central Bank should change its monetary policy and switch to a managed exchange rate, a policy that was given up last year," Associate Professor of the Stock Market Department at the Higher School of Economics Alexander Arshavsky told TASS.

"Considering that the Central Bank pursues the policy of a floating exchange rate and inflation targeting, its actions are quite justified now," the expert said.

"That is, the internal prices are not following the dollar exchange rate so far. The next question is what will happen next? The current ruble-dollar exchange rate will affect prices with a delay, somewhere in November-December. That is, not quite good consequences will follow but they will be delayed in time. And no one knows what will happen by that time," the expert said.

Russians who are focused on foreign consumption and spend their vacations abroad are the main victims of the ruble’s free-fall, the expert said.

"But this is a minority while the rest of Russians are experiencing this in the form of inflation. The prices of imported goods will be rising and it will be necessary to switch to internal consumption," he added.

"Russia is a country with a commodity currency and today all commodity currencies have suffered," Rus-Rating Director for Regional Ratings and Infrastructural Projects Anton Tabakh told TASS.

"All the currencies strongly pegged to oil prices have been affected - each to its own degree. Besides, developing countries’ currencies have suffered to a greater extent and this exerted extra pressure on the ruble," the expert said.

Therefore, it is understandable that this process is uncontrollable, the expert said.

"You can fight against it, burning out reserves as Russia did until November and Kazakhstan until last week. You can fight by raising interest rates but this kills the loan market and is bad for the banking system. That is why, it is sometimes easier to get through it and wait until stabilization while simultaneously alleviating the consequences. This is what the Central Bank is currently doing, by expanding currency repo operations. As far as I understand, now a position has been chosen to wait until the situation stabilizes at some level and subsequently fit economic policy into this," the expert said.

"A weak ruble is advantageous for the budget because more money will come from exports. This is advantageous for all exporters, for those who are dealing with import substitution. This is disadvantageous for those who operate using imported raw materials and imported goods and those who depend on imported components, which are indispensable," the expert said.

"This will affect pensioners because pension indexation will be small while inflation will intensify further and this will affect those whose incomes are fixed in rubles while the share of imports in their consumer goods basket is high. In particular, this will affect those who are dependent on imported medicines," the expert said.

 

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