Central Bank to Widen Ruble's Traded Range

ST. PETERSBURG -- The Central Bank will slowly widen the traded range of the ruble to switch to inflation targeting and may let the currency appreciate within months, chairman Sergei Ignatyev said Thursday.

The ruble came close to the lower end of the basket range Thursday as analysts said they could not rule out a new attack on the currency.

"We do not rule out the possibility of raising the nominal effective ruble [rate versus the basket] in the coming months. We also can't exclude an increase in all or some of the Central Bank's rates," Ignatyev said.

The bank has refrained from appreciating the ruble versus the dollar/euro basket since August 2007, saying it was badly damaging the export-oriented economy.

It has instead raised its key rates, as well as mandatory reserve requirements, but inflation is still running at an annualized rate of 15 percent.

"We are prepared gradually, even very gradually, to widen the technical limits of the ruble's value against the dual currency basket," Ignatyev said.

"If we widen the basket symmetrically, at the higher and lower ends, then it is highly possible ... the value of the ruble versus the basket will more often strive toward the lower end of range," Ignatyev said.

He said he expected inflation to abate soon and that the country may even see deflation in a few months. "Conditions are extremely favorable for lowering inflation in the near future," he said.

"We will see pleasant surprises in the third quarter."