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. Last Updated: 07/27/2016

Ignatyev Sees Inflation, Ruble in Check


Central Bank Chairman Sergei Ignatyev

The head of the Central Bank said Wednesday that he expected lower world oil prices to have a beneficial effect on the ruble, stemming its appreciation and keeping inflation within target range.

"My forecast is that the real effective rate of the ruble will show a rise of some 3 percent to 3.5 percent in the first four months of the year," Sergei Ignatyev told a banking conference.

"Bearing in mind the annual 6 percent ceiling, it is not a bad reading, especially as crude prices were very high."

The Central Bank wants to keep the real appreciation of the ruble against the euro and dollar basket under 6 percent this year to help local firms compete with imports.

The ruble has recently hit a 12-month high against the dollar, propelled by soaring global crude and commodities prices as well as rising investment.

To keep the currency's rise in check the Central Bank has bought dollars from the market for its reserves and to print rubles, sparking fears that 2003 inflation -- one of the country's main economic problems -- might overshoot the 12 percent target.

The 2003 budget put the target for the rise in consumer prices at 10 percent to 12 percent, after 15.1 percent last year. CPI stood at 5.2 percent in the first three months of the year.

"I hope that we will succeed in keeping inflation under 12 percent and in preventing the rise of ruble's real effective exchange rate by more than 6 percent, especially as crude prices are coming down," Ignatyev said.

Global oil prices fell after U.S.-led forces toppled Iraqi leader Saddam Hussein but still hovered above the $21.5 per barrel reference level used in the 2003 budget.

Russia's main crude export blend Urals traded at $23.46 per barrel on Wednesday.

The European Bank for Reconstruction and Development said Tuesday the Russian economy would suffer most if oil prices remain high for the rest of 2003 -- further undermining the competitiveness of the country's non-energy sector -- and then drop next year.

The Economic Development and Trade Ministry has forecast that the real ruble rate would appreciate more than 8 percent against the dollar this year, and economists say that this implied nominal ruble depreciation to 32 against the U.S. currency.

The ruble traded at 31.10 against the dollar Wednesday.