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Oreshkin considers ruble too strong, and inflation – too low


Minister of Economic Development Maksim Oreshkin doesn’t like ruble strengthening its position. The basic forecast of Ministry of Economic Development for average annual rate is 67,5 rubles, not the current one around 59 rubles. However, the experts suppose it quite possible that ruble will not lose its positions.

The Head of Ministry of Economic Development Maksim Oreshkin thinks that ruble is too strong. He told this to the journalists during his visit to Paris. «Inflation is now below our expectations due to various reasons, including the one that exchange rate is lower than we expected. The rate deviated from fundamental indexes and this deviation remains,» — says the Minister.

In the middle of February, when dollar reached an average annual minimum at 56,55 rubles, the Head of the Ministry was sure ruble would weaken. And in fact, American currency started getting more expensive. However, dollar jumped not as high as the minister wanted. At the moment, dollar is being traded at the price around 59 rubles, while the basic forecast of Ministry of Economic Development is much higher — 67,5 rubles.

Oreshkin decided not to comment on the question when ruble might comply with the fundamental factors, pointing out that this would depend on the balance of payments.

«It is essential to understand — for Central Bank is important not only inflation of the current year, but the situation with inflation expectations and expectations of long-term inflation dynamics», — said the minister.

«If in the current year we are going above expectations, everything related to long-term story is not clear or decided yet», — said he commenting on his expectations towards the coming Board of Directors of Central Bank meeting on March, 24. Now the key rate of Central bank is 10%. Analysts think that the regulator’s policy will remain conservatively tough, and the first decrease of the key rate will happen only in the second quarter of the year.

Forecast of Ministry of Economic Development and Central Bank on inflation for 2017 is 4%. However, in February inflation dropped to the historical minimum for this month and amounted to 0,2%.

The experts differ in their assessing of ruble prospects. «The rate has to be around 61,5 rubles per dollar with the current oil prices. Speaking of the factors that influence ruble strengthening, it is considered that one of the key factors is influx of funds due to privatization of Rosneft. When it finishes, ruble rate will reach fundamental indexes», — commented the expert of Economic Expert Group Iliya Prilepskiy.

According to him, now it is expected that in March the FRS rate will grow, the next growth will happen in June that additionally increases pressure on ruble. In the following month ruble rate will reach 60 rubles per dollar, says the expert.

«I believe, ruble is quite close to its objective fundamental figures and that is 60 rubles per dollar», — says the economist of European Bank of Development Yaroslav Lysovolyk. — «This is the level, which reflects the state of balance of payments and the current level of oil prices». Along with that, Lysovolyk thinks that ruble will continue to gain strength.

«This year tendencies prove that these are not one-day standards, but fundamental ones, speaking in favor of ruble strengthening even during the periods of oil prices decrease», — says the economist.

Brent oil is being traded around $51,47 per barrel, remaining the minimal rates ($50,85) from November, 30. The increase in drilling activity in the USA and, as a consequence, the expansion of North American production of oil undermines the efforts of OPEC and other countries, which agreed on production reduction approximately on 1,8 million barrels per day in the first part of 2017. According to Maksim Oreshkin, speaking about oil prices we should forget $55 per barrel.

Uralsib Bank analyst Aleksey Kokin says that official forecast for the average oil price in 2017 remains the level of $50.

«At the moment, ruble reflects the state of Russian economy. If oil production in the USA grows, oil will be under pressure, which now is the main factor of risk. However, ruble showed stability, and basically, it’s unlikely it will fall drastically», — says Lysovolyk.

According to him, there’s hope for some increase in the oil demand from developed economics, and then ruble objectively has to cost around 60 per dollar.

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