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. Last Updated: 07/27/2016

Ulyukayev Says Ruble Appreciation Unlikely

The Central Bank considers ruble appreciation "not effective" in terms of fighting inflation and is unlikely to use the measure for the rest of 2007, First Deputy Chairman Alexei Ulyukayev said Friday.

The ruble exchange rate was the Central Bank's only weapon against inflation while investment flows and oil revenues generated excess liquidity. The global credit crunch that began in August has made liquidity much tighter and this may give the bank more leverage over inflation via the money markets.

"The appreciation of the ruble would not be an effective measure to curb inflation. We confirm our position that we are unlikely to use this measure in 2007," Ulyukayev told a conference.

"The environment we have had since midsummer and will have until the end of the year is such that it would not be correct to use the exchange rate mechanism to curb inflation," Ulyukayev said.

In the second half of 2007 Russia has seen a shrinking balance of payments surplus, net private capital outflows and the liquidity squeeze, which forced the Central Bank to turn its attention from inflation to liquidity management.

"It is realistic to suggest that inflation will be around 9.5 percent to 10 percent," Ulyukayev said, but added: "The Central Bank is not ready to formulate a new figure," saying the new official forecast would be ready by the end of October.