Rouble too strong? Economy too weak? What is Madame Nabiullina up to?
From CNBC, Friday July 22:
- It is the fifth rate cut by the Central Bank of Russia so far this year after an emergency hike from 9.5% to 20% in late February, following Moscow’s invasion of Ukraine.
- In June, it reduced the rate by 150 basis points to 9.5% — the level it was at when the invasion began.
Russia’s central bank on Friday cut its key interest rate by a bigger-than-expected 150 basis points, as the country deals with a strong currency, cooling inflation and a possible recession.
The move takes the key rate to 8% from 9.5%; analysts had expected a rate reduction of 50 basis points, according to a Reuters poll.
“The external environment for the Russian economy remains challenging and continues to significantly constrain economic activity,” the bank said in a statement, while noting that the decline in business activity is slower than it had expected in June.
It is the fifth rate cut by the Central Bank of Russia so far this year after an emergency hike from 9.5% to 20% in late February, following Moscow’s invasion of Ukraine....
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And from Reuters, also July 22:
Russian central bank governor speaks after cutting interest rates
Bank of Russia Governor Elvira Nabiullina gave a news conference after the central bank cut its key interest rate by 1.5 percentage points to 8% on Friday.
Nabiullina spoke in Russian. The quotes below were translated by Reuters.
CURRENCY POSITION"The Bank of Russia sees a positive trend in the process of reducing the value of foreign currency balances in the accounts of the NCC (National Clearing Centre) and the NSD (National Settlement Depository)."Although we have temporarily introduced regulatory relief on the currency position for banks that are under sanctions ... they must have plans to exit that currency position, because we have no intention of extending that regulatory relief beyond Jan 1. 2023."
BANKING SYSTEM"Banks have fared better during this crisis period than we expected. At the moment there is no need for a systemic additional capitalisation of the banking sector.""I personally thought in the beginning, in February and March, because the shock to the financial sector was of such a magnitude, that despite the previously created buffers, the financial sustainability that had been achieved, a systemic additional capitalisation of banks would be required. We do not see the need for that now."
"Yes, the owners of certain banks may need assistance to improve the situation. We gradually want to get out of regulatory easing, not all at once but gradually, nevertheless we will do it. We see that the banks are ready for it."
EXTENDING CURRENCY RESTRICTIONS....
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We are fans of Elvira Nabiullina. She was named Euromoney's Central Bank Governor of the Year in 2015 and quite frankly could have taken home the accolade a half-dozen times in the last decade.
She is the best central banker in the world and I wish she were working for the U.S. rather than Russia.
Some previous posts:"Russian Central Banker Nabiullina Gets Hit With Sanctions"
You knew this was coming, she's too good at her job.
And the sad thing for her was she didn't want to be nominated for her third five-year term:
Russia Central Bank Chief Wanted Out Over Ukraine, Putin Said No: Report
At her first press conference after the invasion she was in mourning for Russia, wearing funereal black.*
Putin Proposes Nominating Elvira Nabiullina For Third Term As Governor Of Russian Central BankIt might be the toughest job in finance.
Central Bank assets expropriated; sanctions on a large part of the economy, from oil to nickel to caviar; cut off from SWIFT; projected decline in GDP larger than the U.S. Dust Bowl year of 1931 (-7% vs. -6.4%); inflation at 20%; collapse of the currency; oligarchs frantically moving assets hither and yon; meme-stock-like swings in the price of oil; store shelves emptying due to hoarding and supply stoppages; C-bank interest rate at 20%; a major war and Vladimir Putin looking over your shoulder every minute of the day.
Rough gig, tough room.....
An Analysis of The Wartime Actions Of Governor Elvira Nabiullina and The Russian Central Bank....The key to any currency operation by a central bank is the art of patience. You can't go burning through your FX reserves attempting to support your fiat. See any number of examples with Soros v. Bank of England being the first that comes to mind. You have to wait for that inflection point where the speculative raid is running out of momentum and then go huge, sweeping any offers and coming back and saying "What else ya got?"
This is apparently what Nabiullina did, minus the American colloquialism, of course.
Homegirl don't play.
