MOSCOW, August 10, Nadezhda Sarapina. From September 14 to 22, the Central Bank will increase the sale of foreign currency almost tenfold. This will satisfy the needs of investors and support the ruble exchange rate. They are also likely to raise the key rate again. However, experts note that tightening monetary policy will not give the desired effect and may have a negative impact on business. What are the options for developing the situation — in the material.
Casting
The financial regulator announced that the sale will be increased to 150 billion rubles. The decision was dictated by the upcoming redemption of Eurobonds (bonds denominated in foreign monetary units). After the payment on September 16, the Central Bank expects increased demand for currency from security holders. Satisfying the needs of investors will help avoid price fluctuations.
In turn, the Ministry of Finance forecasts additional oil and gas revenues in the amount of 279.12 billion rubles. In this regard, they announced the purchase of currency and gold for 276.16 billion rubles in the period from September 7 to October 5. Daily transactions will amount to 13.15 billion rubles. The mirror actions of the Central Bank are designed to smooth out fluctuations from the explosive demand for foreign money.
The regulator will conduct the main sales from September 14 to 22. The daily volume will be 21.4 billion rubles — instead of the previously planned 2.3. The remaining funds to be exchanged as part of mirror transactions related to the financing of the National Welfare Fund will be sold evenly from September 25, 2023 to January 31, 2024. No more such large redemptions of Eurobonds are planned until 2025.
Spartak Sobolev, head of the investment strategy research department at Alfa-Forex, notes that the current market balance is shifted upward, and currency interventions will slow down the gradual weakening of the ruble in the second half of September. According to his estimates, the additional supply of yuan from the Central Bank will help keep the dollar in the corridor of 92.50-101.75 rubles.
BitRiver financial analyst Vladislav Antonov believes that this is a temporary technical measure aimed at smoothing out short-term fluctuations. In the long term, it will not have a significant impact on the exchange rate. In this regard, experts expect another increase in the key rate at the upcoming Central Bank meeting on September 15.
Hard approach
Last time, the rate was increased from 8.5% to 12%, also to support the national currency and reduce inflation. According to various estimates, now the figure can be increased to 15%, but an increase of up to one point is also possible.
Despite the tightening of borrowing conditions, the volume of retail lending has not decreased and it has not yet been possible to restrain the rise in prices. On the contrary, they recorded a fourth consecutive monthly record for the issuance of consumer loans. In August, their volume exceeded 700 billion rubles.
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However, business reacts extremely painfully to rising loan prices. This greatly impacts operations and hampers development. “The business corps is the basis of the country’s economy. And it is already stagnant due to problems in the financial sector; all GDP growth is provided by the military-industrial complex,” says financial analyst Mikhail Belyaev. He explains that the national currency is a derivative of the economy and the long, consistent fall of the ruble is an indicator of underlying problems that cannot be solved by tightening the screws. The key rate affects the state of the economy, and it affects the currency. Now the exchange rate is floating, and it will not be possible to correct it using methods from the 60-70s of the last century. It is the way it is determined by a combination of market conditions, foreign trade and other factors.
Tightening the monetary policy will further complicate production in the country and may result in a decrease in business activity and increased dependence on foreign products. “The best solution is to stimulate the economy by all possible means, including easing monetary policy. Business development will ensure GDP growth, and therefore the strengthening of the ruble,” Belyaev is confident.
Conservative strategy
Experts believe that the key rate is not the only instrument of influence . In particular, it is possible to introduce a rule of mandatory sale of proceeds and strengthen control over the outflow of capital, Antonov suggests. But so far the regulator has not resorted to such actions. The analyst identifies several possible reasons for this “indecisiveness”.
Fears of increasing negative effects come first. A sharp tightening of rules could cause panic among the population and business. Despite the toxicity of the dollar and euro, people will rush to buy currency and withdraw capital abroad in anticipation of subsequent bans. This will cause even more damage to the economy.
Russia also seeks to maintain the image of an open economy, and too severe restrictions will undermine the country’s reputation as a reliable partner. In addition, excessive tightening of control is fraught with shadow schemes for capital outflow. In this regard, raising the key rate and operations in the foreign exchange market are seen as softer measures to regulate the exchange rate.
Perhaps the authorities are relying on a further rise in oil prices and an increase in export earnings, which will reduce the budget deficit and reduce the imbalance between demand and supply of currency without additional measures.
Be that as it may, for now the board of the Central Bank adheres to the chosen course, which is confirmed by the statements of its head Elvira Nabiullina. At the last meeting, she announced that the rate in September would either be left unchanged or adjusted upward to achieve the inflation target of four percent.