This year's core CPI is predicted at 10 to 10.5 percent and the total CPI, at 11.5 percent, announced Alexei Ulyukayev, First Vice Chair of the Bank. He spoke of the Russian government's monetary policies for 2005 at a Wednesday panel discussion at the Federation Council, or Russia's upper house of parliament.
Mr. Ulyukayev said Russia's government and Central Bank had failed to keep inflation at the 10 percent target, but had been able to keep the national currency's appreciation within a target range of 7 percent. The ruble has actually appreciated by less than 5 percent this year, he reported.
The Bank of Russia will further relax its capital outflow restrictions before the year's end, the official said. He reminded his audience that the restrictions were imposed after the currency control & regulation law had come into force in a revised edition. While this law was being drafted, some raised doubts about the feasibility of introducing special accounts for foreign-currency operations and putting aside some of the funds involved in foreign-currency transactions. Already, the Bank of Russia has dropped the requirement to create reserves on non-residents' deposits at Russian banks. Now it is going to suspend the requirement that reserves be set up in the event of capital outflow.
The special accounts for foreign currency will be preserved, however, making it possible for the Central Bank to restore the reserve requirements if the necessity arises, Mr. Ulyukayev said. This set of measures indicates that the Central Bank is ready to act in 2005 under the conditions of broad extremes on foreign markets, he said.
Officials at the Central Bank can see no grounds at this point for bringing its interest rate further down. The rate has been lowered twice so far this year, and is at 13 percent now, he reminded his audience. "Its adequacy is debatable, but it is closely tied to inflation," he said.
With the year's inflation rate expected to reach 11.5 percent, "there are no macroeconomic grounds for further lowering of the interest rate," Mr. Ulyukayev explained. If future inflation control measures prove more consistent, the Bank may contemplate the move.
Mr. Ulyukayev confirmed reports that the Central Bank and the Finance Ministry were planning to sign a deal on Stabilization Fund management. Under the arrangement, money from the Stabilization Fund will begin to be invested in foreign securities in January or February 2005, he announced.
Finance Minister Alexei Kudrin said in a RIA interview that the Stabilization Fund management agreement would be concluded before the end of 2004. According to the minister, the Stabilization Fund reserves will be just a little under 20 billion dollars by the year's end.
The surplus will go to service Russia's foreign debt and to partially repay it ahead of schedule in 2005, he said.
Russia's gold reserves have grown by $44 billion since he year started, Mr. Ulyukayev said. This is a record high for Russia, bringing it to sixth position on world rankings.
Speaking last week at the State Duma, or parliament's lower house, Central Bank Chair Sergei Ignatyev reported that the gold reserves had grown by $40.5 billion in the first eleven months of 2004, as against $20.4 billion in the same period last year.
