CBR has tools to stabilize ruble without targeting, must use them - RSPP head
The dramatic weakening of the ruble benefits exporters and government finances at the moment, but in the long term it creates problems for both importers and the government's budget, Russian Union of Industrialists and Entrepreneurs (RSPP) head Alexander Shokhin said, Azernews reports, citing Interfax.
The Central Bank of Russia (CBR), while refraining from direct targeting of the exchange rate, could use instruments of indirect influence on it in order to avoid significant fluctuations and uncertainty for businesses and households, Shokhin said.
"Targeting of the exchange rate is a policy we abandoned back in 1998 but, nonetheless, there are methods of indirect targeting of the exchange rate through the creation of some sort of currency corridor, intervention to prop up the exchange rate. There are methods and types of monetary policy that have a broader set of instruments," Shokhin said in an interview with Interfax.
He recalled that it is the CBR's duty to ensure the stability of the national currency in line with the Constitution.
"Of course, when there are such ups and downs, a situation of uncertainty is created, whether it's an exporter, importer and so on. There are various verbal interventions, for example, that a rate of 80-90 rubles is comfortable for everyone - for exporters and importers. For the economy, if one has in mind the budget, for a short period probably yes. Then spending will grow on indexation of social payments, the cost of government borrowing increases and so on. Importers, obviously, suffer from the fact that imports become more expensive," Shokhin said.
But what is important is not so much the exchange rate as its stability, he indicated. "The main thing is that exporters and importers and citizens adapt to some understanding of what the exchange rate is, not to it strengthening twofold today and weakening twofold tomorrow and so on. This creates, if not panic, then nervous behavior on the part of economic agents and households," Shokhin said.
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