Russia all but shuts door to raising $500b this year

Policymakers consider boosting reserves secondary to goal of targeting inflation at 4%

The Bank of Russia is keeping its priorities straight. Policymakers will wait for a “calmer moment” before resuming purchases of foreign currency for reserves, which they consider secondary to the goal of targeting inflation at 4 per cent, according to First Deputy Governor Ksenia Yudaeva.

While most economists surveyed by Bloomberg in May expected the programme to restart already this year, the probability of that now is “very low,” Yudaeva said in an interview last week in St. Petersburg during the International Financial Congress.

The central bank, which in 2015 announced a goal of boosting reserves to $500 billion in the long term, hasn’t bought foreign currency for two years. It’s having a harder time juggling such factors as geopolitics and volatile oil prices after inflation quickened more than forecast in June, the first acceleration in 12 months.

“Reaching the inflation target in a sustained way is our top priority, but the task with reserves isn’t,” Yudaeva said. “In fact, its implementation can contradict other tasks, related to reaching the inflation target.”

The about central bank spent a fifth of its international reserves to prop up the rouble during a crisis in 2014 before allowing the currency to trade freely. It bought about $10 billion between mid-May and late July 2015, halting operations when the rouble’s decline started to accelerate.

The central bank’s stockpile of foreign currency and gold was $412.6 billion as of July 14, down by about a third from its 2008 peak.