Russian Economy General News: #2

As Sa'iqa wrote:Methodology was changed and all results from previous years were recalculated to fit the new model. Such a huge jump may be a result of precisely that.

October, 30th. FINMARKET.RU - A draft law on financial injections into the economy in the form of interest-free loans for the ruble bank report "Izvestia".
Thus, the Central Bank in 2015, Russian banks issue interest-free loans of $ 25 trillion, and in 2016 - 30-35 trillion rubles. All this is due to issue the national currency - a bailout bill, amending the law "On the Central Bank," United Russia has developed, a member of the State Duma Committee on Budget and Taxes Yevgeny Fyodorov. As told to the deputy edition bill will be sent to the government next week. Thus, the proposed Russian variant "of quantitative easing" - the author was guided by the idea of ​​the US Federal Reserve experience: from the end of 2008 in the US economy, the Fed was poured about $ 4 trillion by buying securities from banks. Quantitative easing program since 2010 in Japan and are scheduled for this fall in the European Union.
Yevgeny Fyodorov offers to make financial injections into the economy in the form of interest-free loans to the ruble, obtained from the Central Bank funds at 0% banks, according to his plan, should invest primarily in industry. The MP said that the funds will be provided to the regulator to credit institutions for a fixed period of time - for example for 3 years. After receiving their margins with investment of 3-4%, the banks will repay the interest-free loans to the Central Bank continues to Fedorov.
In implementing the proposed scheme, he predicted, in 2015 economic growth (raising GDP) is 20%, and Russian salaries will increase by 50%. Expected in such a case, according to the canons, inflation is projected companion, will, however, in the region of 0%. The MP explained that the figure for inflation will be achieved by refocusing on Russian domestic investment - coupled with the tremendous influx of foreign investment. In addition, he noted that the money supply in Russia is not sufficient for the growth of GDP and is only half of the gross economic indicators.
Chairman of the Duma Committee on Financial Markets Natalia Burykina, quoted by "Izvestia", believes that in order to pour into the banking system 25 trillion rubles, do not need a special bill - the Central Bank have this authority. Another question - in need of such injections, according Burykina, excess money in the economy to spur inflation, which now, according to official data, is 8.5%, and the unofficial - even higher. As noted Burykina, fight inflation can only increase the key rate, not the reset. Head of the Committee on finrynku also indicates that the realization of the idea of ​​Fedorov complicated structure of the Russian economy - money from the regulator through the banks do not reach small and medium businesses on acceptable terms - that is, banks receive funds in the Central Bank of 8%, and loans of SMEs is already under 30 %.
The chief economist of the Russian branch of Deutsche Bank Yaroslav Lissovolik recalls that in the crisis of 2008-2009 issued by Russian banks denominated loans were converted into the currency of the banks, which increased capital outflows and a decline in foreign exchange reserves. The total gross net outflow of capital from Russia in five post-crisis years (2009-2013) amounted to about $ 280 billion. According Lisovolik, the risk that the interest-free loans to the Central Bank will be converted into US banks, rather than focus on the development of the industry, will be high. The expert also noted that the key rate at zero to achieve zero inflation impossible - to combat rising prices can only rise in the index.
Analyst Alex Viazovsky believes that quantitative easing program have a chance only under certain conditions. So, you need to enter the country soft currency control - get exporters to sell in the domestic market foreign exchange earnings, impose large cross-border flows of speculative Tobin tax (0.1% of the financial transactions in shares and bonds and 0.01% - derivatives), yet harder to control currency position of the banking system.
Ministry of Economic Development "News" reported that the assessment of the needs of the banking system's liquidity - the competence of the Central Bank. In Central Bank declined to comment on the initiative of United Russia.

* Central bank raises main lending rate to 9.5 pct from 8 pct

* Large rise reflects concern over falling rouble, inflation

* Rouble down nearly 2 pct after rate move

* Analysts say more steps may be needed

* Bank leaves intervention policy unchanged (Adds details and comment)

Austin wrote:As i said CBR will raise interest rate and they did today , I am not sure if this is the only thing they need to do from Rouble falling.

Russia raises interest rate shiarply as rouble slides, inflation climbs

* Central bank raises main lending rate to 9.5 pct from 8 pct

* Large rise reflects concern over falling rouble, inflation

* Rouble down nearly 2 pct after rate move

* Analysts say more steps may be needed

* Bank leaves intervention policy unchanged (Adds details and comment)

Austin wrote:Klepach: "Europe can no longer be trusted"

http://ru-facts.com/news/view/40582.html

We need deregulation, promotion of small and medium-sized enterprises, easing of fiscal and monetary policies & mdash; government still resisted it & mdash ;, and also stimulate the economy

sepheronx wrote:
Goes to show that central bank has no idea what they are doing. Ruble was increasing in value again as USD and EUR were droping. After increasing interests, value drops? Hahaha.

That said, if what I posted above is true, we may see a Russian QE where they have 0% interest in the future. Dont know if this will create more problems or not. But so far, at least Russia has not seen interest rates like 18% like we had here in Canada. But those interest rate numbers are not good.

Austin wrote:Despite Surprise Rate-Hike, Russian Ruble Crashes Most In 6 Years

Austin wrote:I suspect US/EU in connivance with hedgers and speculators is trying to bring down rouble hope CBR will burn its reserves and Russia would be economically very weak to pursue its own self interest. 

CBR should stop defending rouble , it would fall but it cant fall for ever because eventually the demand support chain would balance it out.

Even if Rouble falls to 45-50 per USD it should be fine , I remember in 2010  Indian Currency fell from 44 Rs to 1 USD to today 61 Rs where it is today.

Its time to act prudently as its Economic Warfare being played out , Just 2 days back Susan Rice US NSA said that US was using it Economic Might against Russia

This is an account of comments made by Igor Shuvalov, Russia's Deputy Prime Minister in charge of the economy, last week in Sochi.

Western leaders might care to reflect on them and on what Shuvalov reports Putin telling Biden (see the two paragraphs at the end).

This is an extract from an interview to Russia Direct, by the American political scientist, Nikolai Petro.
"Russian First Deputy Prime Minister Igor Shuvalov put forward the view that, if they last long enough, Western sanctions will be an impetus for modernization.

The very worst thing that the West could do now is to lift sanctions quickly. This would have the short-term effect of telling government officials and the heads of state enterprises that they need do nothing to change.

Russia would be caught in a more stringent liquidity crunch, as it waited for the end of sanctions to take effect, but still could not obtain credit cheaply or quickly. Shuvalov therefore concluded that, “the sooner sanctions are lifted, the worse for Russian modernization.”

He went on to list several reasons why conditions are now optimal for Russian modernization: Falling gas prices are forcing Russian producers to be more productive; sanctions are forcing Russian companies to search for new sources of international funding at a time when the emerging economies have more cash liquidity than their Western counterparts; low debt and high cash reserves means that Russian investment programs can continue without foreign borrowing – at most, he said, if further sanctions are imposed, Russia will delay full implementation of current programs for two years.

This year once again, he reminded us, the Russian government expects to have no budget deficit. Finally, Putin’s astonishingly high popularity means that he has a window of opportunity to push through unpopular economic reforms.

Shuvalov concluded by telling us of a discussion that Putin allegedly had with U.S. vice president Joe Biden several years ago. Apparently, Biden had just told Putin that Russia was simply too weak to compete for global leadership.

Putin replied that, while Russia might not be strong enough to compete for global leadership, Biden might reflect on the fact that Russia will still be strong enough to determine who that leader will be."

What is happening with the ruble, it seems no longer to float freely, and on the flight. When will it end?


Alexander Abramov: By and large, this will happen only after the abolition or weakening of sanctions . Then the captain go back to Rosie, the companies would have the opportunity again to resort to debt financing in foreign markets. As a result, the ruble gained would be very hard. However, it seems the EU postponed the question of revising the sanctions until spring.
Therefore, in the coming months a lot, in my opinion, will depend on the amount of refinancing provided by the Central Bank of the banking system. It is for the purchase of currency and repayment of corporate foreign debt. Who is the Central Bank refinancing objectively motivates the process of falling ruble. I do not see until the other real arrangements that the Central Bank can use in this situation, but to limit the refinancing.


Where, then, banks and companies look for resources to repay the debt?


Alexander Abramov: Under normal circumstances, they would have started to sell unnecessary assets and optimize costs. But since all continue to hope for the state, banks and companies have no incentive to look for internal reserves. And you need to get them uzhatsya to repay foreign debts by saving their money.


Many wonder where is the "bottom", reaching which, the ruble still stop.


Alexander Abramov: On this account there is a naive, but interesting indicator: the ratio of the money supply in the country to international reserves. Roughly, how many of the state currency to cover currency hype. For a long time the ruble approximately matched this calculation indices. And now he is 66 rubles per dollar. Here are a few rough calculation, which can theoretically go ruble.


The real fall of the ruble will, of course, smaller. Given the schedule of payments on corporate foreign debt, while maintaining sanctions dollar to the end of 2015, will be located at the level of 50-55 rubles.


And what is your outlook on the exchange rates for the next month or two?

Alexander Abramov: The ruble will continue to fall. Until the end of the year the dollar will add 2-2.5 rubles, and during November - 1 to 1.5 rubles.


That is, the rate of ruble weakening considerably below?


Alexander Abramov: Yes, because the peak of debt payments is in December, and I think that the main reserves for these payments and banks have already formed. In the currency market this excessive demand, as in October, should not be.


As the decision of the Central Bank to raise its key interest rate will affect the ruble?


Alexander Abramov: At any time it is somewhat hit by the temperature in the ruble, simply because banks for refinancing through the Central Bank will be more expensive. Someone more expensive money just stop.


But there is another problem: the loans become more expensive for businesses, it is even more retards economic growth. In terms of sanctions do more expensive money for the business, not based on currency speculation - is a difficult decision.


On the other hand, leave the rate unchanged - then give a very strong signal to the market that the Central Bank considers normal current rate of ruble depreciation. And it will spur many participants buy more dollars or euros in case something might not work. Pure psychology. That is, again, at some time, this will increase the drop rate.

It turns out that whatever decision the Board of Directors adopted the Central Bank, it is risky. Now it is not clear what to fight in the first place: inflation and devaluation of the ruble, or with low investment activity and slowing economic growth.


Currency-deposit auctions Finance and dollar repo auctions of the Central Bank can help?


Alexander Abramov: Can, but, first of all, banks need dollars not on such a short time and not at such rates as they were offered at the first auction of repurchase in dollars. That is why he failed. Secondly, we must understand that if this practice will take wide scope, it will actually mean the introduction of a number of parallel exchange rates. And this is a very dangerous thing. The next step could be the introduction of the official exchange rate of the dollar, as it once we had. With all its consequences.


And if you go up the price of oil? This can not be excluded after the OPEC meeting in late November.

Alexander Abramov: Then, of course, a little ruble win. But hardly OPEC will reduce the release of oil. Current price, it seems to me, artificially holding Saudi Arabia, thus attempting to keep the Russian energy market in China. There is also the factor of low energy demand.
 

Russia's Central Bank to Limit Forex Interventions to $350 Million a Day

• Reuters
  
• Nov. 05 2014 10:24
  
• Last edited 10:24
  
  

MOSCOW — Russia's Central Bank said Wednesday that it had changed its intervention policy for the ruble exchange rate and was now limiting the size of its interventions to $350 million a day.

In a statement, the bank said the move would significantly increase the flexibility of the exchange rate, meaning the rate will now largely be determined be market factors.

The bank also said it would continue to move the ruble's corridor against a dollar-euro basket by five kopeks once the bank has expended $350 million in interventions. The ruble has lost more than 20 percent of its value against the U.S. dollar this year.

Werewolf wrote:And how much would that effect the ruble exchange rate?