Nabiullina: the ruble is less volatile than oil prices

MOSCOW, October 13. The rouble less volatile than oil prices, said Bank of Russia Chairman Elvira Nabiullina in an interview with CNBC.

“There is no doubt that the ruble exchange rate affects inflation and inflation expectations. The exchange rate, in turn, also depends on many factors – of which the main one is the main level of oil prices. We believe that oil prices are quite volatile. By the way, the ruble is slightly less volatile than oil prices. Let’s hope that oil prices will be fairly stable, but the ruble will be stable, but we will make a rate decision based on available data. In this respect we are dependent on data, and we closely follow the market trend,” – said Nabiullina.

According to her, the fall in oil prices and the end of the so-called commodity “super-cycle” has led to many importers of energy products suffered from declining inflation and deflation.

“In our case the situation is opposite. The fall in oil prices may lead to a certain pressure on the ruble and can carry inflationary risks. That’s why we monitor them very carefully – all external factors, they exert upward or downward pressure on inflation – to make decisions that take into account the balance of risks to inflation and economic growth to achieve our goal of stabilizing inflation”, – said Nabiullina.

The fall of the ruble began in the second half of 2014, while from June to December, the Russian currency has fallen against the dollar by 2.2 times. However, since the beginning of February of 2015, the ruble has turned to growth and by may has risen in price to dollar by 30%. In may the dollar exchange rate repeatedly dropped below 49 rubles, however then the American currency has returned to growth. From mid-may to date, the dollar rose to 49 rubles to 62 rubles.

Despite the fall in oil prices from $115 per barrel in June 2014 to $75 in November 2014, OPEC on 27 November last year, has maintained production quotas at 30 million barrels a day. This decision dropped the price of oil. Since then, oil prices fell by 33%, falling to current $50 per barrel.

The Outlook for inflation

Inflation in Russia in 2015 will amount to 12% and then begin to fall quite sharply, said the Chairman of the Bank of Russia Elvira Nabiullina.

“We expect inflation to end this year will be a little more than 12% – from 12% to 13% but then it starts to fall quite sharply, because it will be those one-off factors that caused inflation, but also due to weak demand in the economy and our tight monetary policy,” she said.

According to Nabiullina, inflation in the previous month was because “we have witnessed some depreciation of the ruble in August, in which there was some growth of inflation in September”. “However, we do not anticipate that inflation will continue to grow.

On the contrary – it dropped to 0.1 percent in the week that we observed throughout most of the summer,” said the head of the Central Bank.
According to the updated forecast of economic development, inflation in 2015 will amount to 12.2 percent in 2016 and 6.4%.

The situation in the banking sector

The banking system has adapted to the new changing conditions and willing to increase lending to the real sector of the Russian economy. This was announced by the Chairman of the Bank of Russia Elvira Nabiullina in interview to TV channel CNBC.

“We are constantly analyzing all the indicators of the banking system, as well as monitoring the situation with bad assets, to be sure that banks create sufficient provisions for bad loans. In our view, the banking system has adjusted to new changing conditions and willing to increase lending to the real sector of the Russian economy,” she said.

The head of the Central Bank of the Russian Federation noted that, indeed, banks were in a difficult situation at the end of last year and early this year. “The cost of financing for them has increased dramatically. They cut lending to the economy. But the situation began to change”, – said Nabiullina.

She noted that since may, banks began to increase lending to the real sector of the economy. “And the deposits returned to the banking system, and within nine months the growth of deposits was slightly more than 13%, so the banks have the resources and ability to provide lending to the economy”, – said the head of the Central Bank.