MOSCOW (Reuters) – The ruble’s exchange rate is near fundamentally justified levels, Russian Economy Minister Maxim Oreshkin said on Friday, after warning earlier this year that it was too strong.

Speaking at Reuters annual investment summit in Russia, Oreshkin also said he did not expect the currency to fluctuate significantly given the price of oil, Russia’s main export. .

While households and import-oriented businesses benefit from a stronger ruble, as it reduces inflation and makes foreign goods cheaper, the oil-dependent economy and budget benefit from a weaker currency because they receive more funds from the sale of commodities abroad for dollars.

“Now we are close to fundamental levels,” said Oreshkin, when asked about the ruble rate.

He said the ruble’s gains earlier this year were caused by inflows in Russian domestic bonds. Many local borrowers also converted the funds raised from eurobonds to rubles earlier this year.

“In addition, strong expectations of 55 have accumulated in the market,” Oreshkin said, referring to the rate of the ruble against the dollar.

The ruble hit its lowest point in history at 86 against the dollar RUBUTSTN = MCX in early 2016 before recovering with the price of oil to reach 55.72 in April.

The rally in the ruble prompted Finance Minister Anton Siluanov and other government officials to say the free-floating currency was too strong and led to one of Oreshkin’s many verbal interventions.

The currency was trading around 57.60 against the dollar on Friday, up 6.5% so far this year, but still well below the levels around 30 where it traded for several years before. the annexation of Crimea by Moscow in March 2014.

The Economics Ministry is forecasting a ruble at 63 by the end of the year, but Oreshkin said, “With the current price of oil, I don’t see any significant movements in the exchange rate.”

Oil prices have gained more than 15% in the past three months to trade above $ 56 a barrel LCOc1, and were flat on Friday, as investors waited to see whether producers would support an extension of production cuts beyond March.

INFLATION ANCHOR

Annual consumer inflation, which peaked at 17% in early 2015 when the ruble collapsed, has slowed rapidly this year, reaching 3.3% in August.

Now, with a level below the target level of 4%, the central bank faces the increasingly complicated task of keeping pace with consumer price growth, Oreshkin said.

“To keep inflation at 4%, you have to understand all the processes and give an accurate forecast for the next 6 to 12 months,” Oreshkin said.

After controlling inflation, the central bank still maintains a restrictive monetary policy. He lowered the key interest rate to 8.5% this month and said he would lower it to 6.5-7% in 2019.

He also said he still had to convince households that inflation had slowed from double-digit levels.

To anchor such expectations quickly, inflation would have to hover in a narrow 1% corridor, Oreshkin said.

Analysts and economists polled by Reuters had forecast annual inflation of 4.1% and the key rate to 8.25% by the end of the year.