Decisions about the key exchange rate are not expected to move the ruble on their own. This view was shared by Andrey Kochetkov, a leading analyst at Otkritie Investments, with socialbites.ca.
He explained that without inflows of external capital, the Central Bank of the Russian Federation’s interest rate has little influence on the ruble. In his assessment, private money in the foreign exchange market and a lack of foreign exchange supply from exporters mean the rate factor plays only a minor role in determining the ruble’s value.
The analyst noted that raising interest rates would not make ruble-denominated instruments and deposits more attractive than they already are.
According to him, the main driver behind the ruble’s strength in October was a presidential decree requiring exporters to sell foreign currency. That policy increased foreign exchange supply beyond what the market could absorb, pushing the reference point for the ruble in November to be largely guided by oil price movements and exporter sales activity.
He added that one official objective guiding this process is the president’s statement that the exchange rate should hover around 90 per dollar. Consequently, the ruble is expected to remain near that level in November, with a potential deviation of about 2 to 3 rubles in either direction.
Attention turns to the upcoming regular meeting of the Central Bank’s board, scheduled for Friday, when the key rate decision will be announced. A survey conducted with Izvestia last week showed nine of twelve participating banks anticipate a rate rise to 14 percent, while Expobank’s analysts projected a 15 percent target.
Some market participants consider an aggressive rate hike as a risky path. Peter Arefiev, associate professor at the Financial University under the Government of the Russian Federation, cautioned that further tightening could jeopardize jobs nationwide. He suggested that holding rates steady through the summer of next year, followed by a measured easing cycle, might be the prudent approach.
In a separate historical note, the discussion around the Fed meeting and external market factors was compared to a legendary military engagement, highlighting the high stakes involved in monetary policy decisions and the potential real-world impact on employment and growth.