MOSCOW, November 18 (Sputnik) – Russia’s financial system is currently as strong as ever and prepared for any strong peripheral negativity, Russian Central Bank head Elvira Nabiullina said Tuesday.
“The financial markets are currently stable and the banking sector is continuing to function normally, so this says that our financial system is currently much more stable than in previous years and much more prepared to considerable fluctuations on the prices of oil or other outside factors,” Nabiullina said during her speech in front of Russia’s lower house of parliament, the State Duma.
Last weekend, Russia's central bank head announced an overhaul of the national economy. It included specifically what Nabiullina described as "considerable changes in the ruble's exchange rate". She said the country's banking system was undergoing a transition to free floating currency exchange rates in a bid to scale down the government's support for the ruble, which allegedly made it weaker.
The ruble went into decline this spring following Western sanctions on Russia over the Ukraine crisis and a fall in oil prices. This made the Russian Economic Development Ministry update its forecast of inflation rates for 2014, raising the figure to 7.2 percent from the original 6 percent.
Impossible to Control Currency Exchange Rate in Current Economic Conditions
Central Bank believes controlling the foreign currency market to be impossible in the current economic conditions, Nabiullina said.
“It is completely impossible to control the [ruble] exchange rate and try to maintain some sort of orientation of the exchange rate in the current economic conditions that the Russian economy is now in by keeping its dependency on the price of oil,” Nabiullina said.
“It’s impossible to combat fundamental global factors,” she added.
Following the imposition of Western economic sanctions against Moscow and the decrease in oil prices, the Russian ruble has fallen more than 20 percent against the US dollar over the past three months. In early November, the ruble hit a historic low of over 48 rubles to the dollar and more than 60 rubles to the euro.
Earlier in November, the Central Bank said it had drastically decreased its support for the national currency, by scaling down currency interventions. The institution also announced the transfer to floating exchange rate.
According to the Central Bank, currency fluctuation will continue in near future, as the market is adapting to the new regulator's policy.
