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. Last Updated: 07/27/2016

Central Bank May Cut Forex Purchases

The Central Bank this year may reduce foreign currency purchases by one-third to between $70 billion and $80 billion as energy revenue declines, deputy chairman Alexei Ulyukayev said.

The bank "plans to buy $40 billion to $50 billion less" than last year, Ulyukayev said on the sidelines of a conference organized jointly by the MICEX Stock Exchange and the London Stock Exchange on Monday.

Russia limits daily movements of the ruble against a basket of foreign currencies by buying foreign currency as it seeks to curb inflation spurred by inflows of petrodollars. Oil prices are expected to decline to $55 per barrel from $61 per barrel this year, according to the Economic Development and Trade Ministry.

The Central Bank plans to reduce its foreign currency purchases every year through 2010, when the bank may stop intervening in the foreign currency market, Ulyukayev said.

"The year 2010 is the point at which the trade surplus may approach zero, at which time the Central Bank will no longer act as a balancing mechanism and will not buy foreign currency," he said.

Consumer price growth probably slowed to 0.7 percent in March from the previous month, Ulyukayev said. Consumer prices rose a monthly 1.1 percent in February, while annual inflation reached 7.6 percent. The government aims to contain the annual inflation rate between 7.5 percent and 8 percent this year. The trade surplus will probably reach $137 billion in 2007, the Finance Ministry said Friday.

Oil prices have risen 5.5 percent since Iran detained British naval personnel on March 23. Crude oil traded near $66 per barrel in New York amid concerns that the standoff between Britain and Iran over the capture would disrupt crude supplies from the Middle East.

The Central Bank may re-evaluate its plans to reduce foreign currency purchases if oil prices remain high, Alexander Morozov, chief economist at HSBC bank in Moscow, said Monday.