Russian economy minister says ruble has deviated from core value and is expected to strengthen by year end
VLADIVOSTOK, Russia (Reuters) – Russian Economy Minister Maxim Oreshkin on Wednesday said the ruble had “seriously deviated” from its core value, but expected it to firm to 63 -64 rubles to the US dollar in December of this year.
Earlier this week, the ruble hit 70.60 against the US dollar RUBUTSTN = MCX, its lowest since mid-March 2016, extending the losses that began in early August with the threat of further US sanctions against Moscow.
Officials, including some from the finance ministry, said they had a wide range of tools to use in times of high market volatility.
Until now, the tools had not been needed and there was no need to force exporters to sell currencies to support the ruble, officials said.
“Currently there is a deviation from the fundamental level (of the exchange rate) … It can go on for quite a long time,” Oreshkin said Wednesday.
The ruble floated freely and was influenced by a number of factors, including sanctions and capital outflows, Oreshkin said on the sidelines of the Eastern Economic Forum in the Russian city of Vladivostok in the Pacific.
The Ministry of the Economy lowered its economic growth forecast for 2018 this month to 1.8% from 1.9% and to 1.3% from 1.4% in 2019 against the backdrop of changing markets, faster capital and pessimism about the possibility of further US sanctions.
“We don’t expect any big positive surprises for the third and fourth quarters (in terms of economic growth),” Oreshkin said. “This is due to the increased unpredictability, the higher volatility in the financial markets.”
Oreshkin said he did not expect economic growth to exceed 1.9% in the last two quarters of 2018.
Russia’s central bank board meets on Friday to decide its key interest rate, with analysts expecting the rate to remain stable, with central bank sending hawkish signal in statement to calm markets .
Oreshkin said on Wednesday that annual inflation this year could exceed its forecast of 3.4% if the ruble’s exchange rate remains at current levels. The central bank’s inflation target is 4%.
Reporting by Polina Nikolskaya; Writing by Maria Kiselyova / Katya Golubkova; Editing by Christian Lowe and Eric Meijer