The Central Bank of the Russian Federation will probably stop intervening into the national currency market in order to strengthen the ruble against the U.S. dollar and hold down the growing inflation.
This was stated by the Alexei Kudrin, Russian Minister of Finance, at the investment conference in Moscow today:
In the coming three years we should move to an inflation targeting regime and a floating exchange rate.
The consumer price inflation in Russia was at the highest level since 1998 last year â at 11.9%. Prices grew on the elevated global and domestic demand for oil and food, failing to meet the central bankâs target rate again.
Currently one of the main tool that the Russian central bank uses against inflation is the foreign currency interventions that make ruble appreciate against dollar and other world currencies, holding inflation rate down.
But now monetary authorities of the Russian Federation aim to reduce the volume of such activities and let the national currencyâs value to be determined by the free exchange market in a greater extent. If this happens, interest rates will become the main instrument of the monetary regulation for the Russian government.
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