Central Bank Insists Ruble Target Realistic
MOSCOW (AP) _ Russia’s Central Bank on Friday vowed to keep a tight lid on the money supply to corral the ruble inside the government’s target exchange rate.
Tatiana Paramonova, the bank’s acting head, said the bank would have to help keep the budget deficit ``within determined parameters″ in order to stabilize the currency.
The government and the bank on Wednesday set the first target rate since the ruble began to float in 1992, pledging to keep the Russian currency between 4,300 and 4,900 to the dollar until Oct. 1.
The move is meant to help curb inflation by assuring people about the ruble’s stability and predictability. It followed a strong rally by the ruble, which has gained 12.5 percent in value since hitting a low of 5,130 in early May.
Some experts were doubtful that the Central Bank could keep the ruble within a range without depleting its estimated $10 billion in hard currency reserves. Others said the range was artificially high and could lead to a sharp plunge after Oct. 1.
But Paramonova insisted the target was realistic and firmly grounded in the government’s tight monetary and fiscal policy. She said the range might even be tightened in the fall.
``If we don’t issue credits to cover the budget deficit, if we don’t give loans to industries, we will be able to meet not only these targets, but maybe a narrower corridor,″ she said.
The bank issued an order limiting the circulation of cash last month. The order was aimed at reducing cash payments between companies, a major source of tax evasion. It also helped squeeze the money supply to meet the government’s inflation-curbing targets.
Paramonova said the order had taken 2.7 trillion rubles out of circulation so far.