Today, October 25, 2019, there was a meeting of the Board of Directors of the Central Bank of Russia, at which a reduction of the key ruble rate by 0.5% was discussed. Such actions of the Central Bank are well-reasoned, yes, innovations will shake the ruble exchange rate, however, it will benefit the dollar and the price will rise to 70 rubles. Elvira Nabiullina, who is the main regulator, said about easing monetary policy.
Nabiullina says that the Central Bank is determined to innovate in monetary policy. The last meeting of the directors discussed the issue of reducing the key rate, which is the penultimate one that year. The new tactic of the Central Bank is not refinancing, when the rate was reduced by 0.25%, now they will sharply reduce the indicator by 0.5%.
According to Anton Pokatovich, the chief analyst of BCS Premier, “the attractiveness of ruble debt yield will decrease. This suggests that by the end of the year the dollar will explode to 67.5 ". This type of monetary policy will lead to excessive volatility of all assets that have been denominated in national currency.
If it is possible to regulate domestic policy, then there may be problems with foreign policy. Do not forget about US sanctions, on which the value of the Russian currency directly depends. Such restrictions as: a ban on transactions with Russian treasury bonds, on lending to state-owned companies of our country and restriction of SWIFT transactions are already in place. Despite the fact that US President Donald Trump decided not to apply the new list of restrictions (in order to maintain a warmer relationship with Russia), one restriction had to be introduced - this is a ban on the purchase of US Treasury bonds of Russia denominated in Euros by American investors. Albert Koroev, who is an expert on the stock market, BCS Broker, says, “at the same time, no one will guarantee that the topic of sanctions in an expanded form will not get a second wind.”
More in Russia they are afraid of lowering the price of black gold. The Ministry of Economic Development conducted an assessment, which showed that Urals next year will cost an average of 57 USD per barrel. If we take statistics from January to August 2019, the price of Russian oil reached and exceeded the price of 67 USD.
The Ministry of Finance believes that the price of oil may fall to 40 USD - this is a failure of oil quotes, which will lead to budget stress. The National Welfare Fund will cease to receive excess profits from the export of liquid hydrocarbons, however, the federal treasury will not suffer from this.
Another problem that affects the ruble exchange rate is the outflow of capital. Compared with the figures for 2018, when the outflow of capital reached 60.7 billion USD, in 2019 the pace decreased, however, if we take the statistics for January-August of this year, the losses will amount to about 26 billion USD.
The Ministry of Economic Development believes that about 150 billion USD will leave the country in the next 4-5 years. Naturally, the withdrawal of capital will negatively affect the ruble exchange rate and significantly reduce its value. Sergei Glazyev, who is the Minister for Integration and Macroeconomics of the Eurasian Economic Commission and former adviser to Vladimir Putin, says, “capital outflows threaten normal cash flow in Russia.”
The International Monetary Fund predicted the global financial crisis, which should be most feared. According to data from analysts and experts at various levels, next year there will be a record slowdown in global economic growth. The most interesting thing is that this collapse will affect all developed and developing world states. It is no secret that the economy has its own cyclical nature; at the moment, the growth of the world economy has been the weakest compared to the crisis of 2008-2009. The world community believes that a crazy world cataclysm is coming, which will unconditionally lead the ruble to a significant drop.
Alexander Kuptsikevich, who is an analyst with FxPro, said: “From crisis to crisis, the ruble weakened sharply and only partially recouped losses. Lately, there are more and more signs that global economic growth is lame, threatening the world with a possible recession in the coming quarters. A new phase in the escalation of trade disputes between Washington and Beijing will draw another wave of fears around the sustainability of the global economy, which could send the dollar far beyond 70 rubles. In the event of a crisis similar in scale to the events of 2008, the US currency may step beyond 100 rubles by the end of next year. ”