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The Bank of Russia has managed to strengthen the country's financial system
Over the past year and a half Russia was faced with serious challenges from outside, who have had a significant impact on all spheres of life. The conflict in Ukraine and the subsequent deterioration of relations with the West not only put pressure on the Russian market, but also led to the introduction of bilateral sanctions. The situation worsened the fall in energy prices, the price war instigated by the United States and OPEC - Russia's main export, which led to a cooling of the economy and the need to take appropriate steps to normalize the situation. Under these conditions, a crucial role in preventing major disruptions played Central Bank of the Russian Federation.
One of the most painful consequences was the inability of Russian companies to refinance their debt in foreign markets. In this situation, the central bank has provided the necessary amount of liquidity through repo arrangements that will ensure stable functioning of not only the banking system, but also the real economy.
In December 2014 the situation on the Russian market has deteriorated, the volatility of exchange rates has risen sharply. The Central Bank had to apply "shock therapy" - to raise its key interest rate to 17%. In fact, it was the only option to stop the panic, so dangerous for the economy. When the situation returned to normal, mega-regulator series began lowering its key rate, and current rate is 11%. Thus managed to avoid serious consequences and prevent large-scale industrial decline. It should be noted that the Central Bank did not resort to the implementation of harsher measures, such as raising reserve requirements for banks. This initiative could inflict a serious blow to the banking system and cause a crisis in the sector.
At the same time the central bank continued recovery of the banking system through the revocation of licenses from financial institutions that do not comply with the relevant rules of the law of the Russian Federation, regulations of the Central Bank, are too risky policies, undermining the credibility of the entire system, if not engaged in dubious transactions. The concentration of capital leads to a significant strengthening of Russia's economy in the long term contributes to the growth of credibility of institutions both within the country and outside contractors.
The central bank also refused to implement the initiative of the ban on foreign currency transactions, pointing out the risks of the return of "black market" that will lead to higher costs for Russian business, including the increase in the number of suspicious transactions. It was possible to avoid, among other things and the rapid development of the corruption schemes. Megaregulator also recalled that the implementation of such practices in the past in one country does not lead to positive economic results.
Switching to a policy of inflation targeting and market rate fixing will bring the model of the Russian economy to the market. Moreover, in terms of falling prices for oil, artificial retention rate of the Russian currency would lead to a senseless waste of international reserves. On September 11, 2015, the reserves amounted to 365.1 billion dollars. Such a "safety cushion" will allow Russia to go through more difficult times, if conditions deteriorate sharply.
The CBR continues to accumulate gold in their reserves. In August, the regulator bought another 31 tonnes of metal. As of September 1 this year in the reserves of the Bank of Russia was 1.3 tonnes of monetary gold, that is, from the beginning, it was bought by another 112 tons, an increase of 9%. The value of gold in reserves rose 3.4% to $ 47.68 billion, and now amounts to a little over 13% of the total reserves of Russia.
In the context of geopolitical confrontation with the West to keep all international reserves in sovereign bonds of western countries, in my opinion, not the best choice. The Central Bank is obliged to take account of any developments. By the way, the growth rates of the Federal Reserve - a negative, not only for raw materials and gold, but also for the sovereign bond market. Rising yields in the bond market leads to the impairment of the debt portfolio.
The devaluation of the ruble, which in the fall of oil prices and the transition to a free rate fixing, was inevitable, led to a rise in inflation. However, at year-end rate of consumer price growth is unlikely to exceed 13-14%, which is generally quite adequate given the current situation. The target value for the Central Bank - 4% in 2017.
Do not forget that the devaluation had a positive impact. In particular impetus to more active growth of domestic production obtained, which allowed Russia to take the policy of import substitution. In the long term it will lead to much greater economic stability and its independence from external suppliers.
As a result of the weakening of the ruble capitalization of Russian companies in dollar terms it has fallen seriously, which is not surprising, since the foundation of the economy - it is oil and gas holdings. Thus, the RTS at the beginning of 2014, ie, before the events in Ukraine, was at 1 442.73 (on January 6, 2014), September 23, the index is trading at at 784.47 points at the time of this writing, that is, almost double the fall. At the same time, unlike the United States, stock indices in Russia virtually no effect on consumer confidence and domestic demand. In view of this conclusion, the policy of the Central Bank, which is in an acute situation acted solely by market methods, it is absolutely justified, as the impact of falling share price on the real sector was weak. But investors have a unique opportunity to buy a first-class assets at low prices.
In a situation of falling of oil prices and the negative impact of foreign factors Ministry of Finance and the Central Bank faced a difficult choice: budget sequestration provided "security" items such as social and defense spending, or a large-scale devaluation. As a result, the choice is made in favor of the "golden mean", which made it possible not only to avoid a serious crisis, but also to lay the basis for strengthening the financial system from the inside. Thus, mega-regulator has taken all necessary measures to preserve financial stability in a difficult economic situation in Russia.