MOSCOW: Dependence of the ruble rate on oil prices dropped threefold, Chairperson of the Bank of Russia Elvira Nabiullina said on Friday. “There was a period when we saw the elasticity coefficient of 0.9 [ruble rate dependence on oil price – TASS]; it was even equal in 1 for short periods. According to our estimate, [it is] 0.2-0.3 now. As you can see, trends may vary,” she said. The oil price influences on the ruble rate but it is not the only significant factor for it,” Nabiullina added.
The average annual oil price projected by the Bank of Russia will be $50 a barrel in 2017, according to Nabiullina. “Assuming the conservative approach towards base case scenario preparation, we set the oil prices decline to $40 per barrel by the turn of 2017. The average annual oil price will be about $50 per barrel in such case, that is, much higher than in previous version of the scenario,” she said.
The oil price decline will not entail an adverse economic dynamics, Nabiullina said. “We do not expect the economic dynamics will become negative if oil prices decline. Rates may become slightly slower at the end of this year – early next year but economic trends we see now will continue after that,” she added. Meanwhile, dependence of the ruble rate on oil prices dropped threefold, the Governor of the Bank of Russia said. “There was a period when we saw the elasticity coefficient of 0.9 [ruble rate dependence on oil price – TASS]; it was even equal in 1 for short periods. According to our estimate, [it is] 0.2-0.3 now. As you can see, trends may vary,” she said. The oil price influences on the ruble rate but it is not a single significant factor for it,” Nabiullina added.
The Russian Central Bank sees no reason for abandoning floating ruble exchange rate, according to Nabiullina.”In the foreseeable future, I do not see any factors that would make it necessary to abandon the floating rate. I am convinced that, despite the consequences that are perceived negatively by the market participants, there are more advantages,” she said, explaining that the floating ruble rate avoids deep correction of the course that negatively affects the economy. Floating ruble exchange rate allows the economy to adjust to external shocks quicker, Nabiullina said. Its introduction in 2014 coincided with the fall of oil prices, the inflation surged, but in 2016, thanks to the increased adaptability of the economy, almost similar decline of oil prices did not lead to a surge of inflation, Nabiullina concluded.
