Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Central Bank Mulls Diversifying Reserves

TULA -- Russia may diversify further the currency structure of its $300 billion in gold and foreign exchange reserves, the world's third largest, a senior central banker said Wednesday.

"Diversification will happen. It makes sense. We are discussing it," Alexei Ulyukayev, first deputy chairman of the Central Bank, told a seminar for journalists.

The Central Bank keeps its reserves in four currencies -- dollars, euros, pounds and yen. Their exact structure is a secret, but Chairman Sergei Ignatyev said last July that they were composed of roughly 50 percent dollars and 40 percent euros.

Ulyukayev said the bank might fully disclose the currency structure of its reserves this year. Officials have named the Canadian and Australian dollars and Swiss franc as possible candidates for diversification.

Falling oil prices are likely to reduce Russia's current account surplus, which hit a record $95.6 billion last year, reducing pressure on the Central Bank to intervene on foreign exchange markets to curb excessive ruble appreciation, Ulyukayev said.

"All other things being equal, we may continue to use this instrument. It is very effective," said Ulyukayev, a liberal economist widely regarded as the Central Bank's top policy spokesman.

"There are fewer reasons [than there were previously] for us to use the exchange rate mechanism to fight inflation, but we are free to use it."

He said the Central Bank wants to move to pure inflation targeting but that this could not happen as long as it runs a managed float of the ruble using a currency basket, composed of $0.60 and 40 euro cents, as its policy guide.

"Inflation targeting combined with a regulated exchange rate is impossible. Targeting requires a free float," Ulyukayev said, adding that the bank would be ready for a free float in three years.