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Peter Davis

An writer at FOMOdrive

  • Aug 28, 2023
  • 2 min read

The Bank of Russia brought down the US dollar, announcing an extraordinary meeting

After the Bank of Russia made an unexpected announcement, the dollar plummeted by nearly 4 rubles.

At the start of the day, the USD surpassed the 100 rubles/$ mark for the first time since March of last year.

The Central Bank's rate will be declared at 10:30 Moscow time on Tuesday.

At 17:09 Moscow time on Monday, the dollar began to rapidly decline following the announcement of an unexpected meeting of the Central Bank of the Russian Federation. By the end of the day, the dollar had dropped from its daily high of 101.7 rubles/$ to 97.66 rubles/$.

The Central Bank of Russia has announced that it will be holding an unscheduled meeting on the morning of August 15. The press release regarding the decision of the Bank will be released at 10:30 Moscow time, which is earlier than the usual time of 13:30 for scheduled meetings.

The rate meeting scheduled for September 15 was to follow the July rate increase from 7.5% to 8.5%, which unfortunately did not prevent the ruble from plummeting.

At the start of the day, Maxim Oreshkin, an aide to the president and former Minister of Economic Development, commented that the depreciation of the ruble makes restructuring the economy more difficult and has a negative impact on the incomes of Russians. According to him, the primary cause of the ruble's devaluation is a lax monetary policy.

The Central Bank has previously emphasized that it does not perceive any threats to financial stability due to the depreciation of the ruble. Deputy Chairman of the Central Bank Zabotkin stated that the regulator does not have any "quantitative criteria for the exchange rate" and is committed to the inflation targeting policy, aiming to keep it close to the target level of 4%.

At an unscheduled meeting, the Central Bank can take multiple steps to stabilize the exchange rate. These steps include raising the key rate, which will reduce demand for imports, increasing the required reserve rates to limit the surplus of ruble liquidity, tightening the rules on cross-border capital traffic, and suggesting an increase in the rate to 10-10.5% in Promsvyazbank.

The BCS suggests that regulations for the repatriation of foreign exchange earnings for exporters may be tightened, as well as stricter control over the removal of capital abroad.

Sovcombank expects that the Bank of Russia will consider raising the key rate to between 10-13%. This is an important signal to the market that the authorities do not want the exchange rate to weaken quickly beyond 100 rubles per dollar.

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