THE RUSSIAN RUBLE

The Bank of RussiaMarket Operations Department

Toward more flexible exchange rate (1)

Source: IMF (2009)

de jure classification

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

pegged intermediate (incl. Russia) floating

Toward more flexible exchange rate (2)

Source: IMF (2009)

de facto classification

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

pegged intermediate (incl. Russia) floating

Results of different exchange rate regimes

Source: IMF (2009)

de jure classification advanced emerging developing all advanced emerging developing all

pegged 2.7 11.6 8.1 8 2.5 1.2 1.3 1.4intermediate 6.7 12.9 11.1 10.8 2.3 2.4 1.5 1.9float 3.6 17.1 17.4 13.6 1.9 1.5 1.1 1.4de facto classification

pegged 2.7 11 8.2 11 2.5 1.7 1.4 1.6intermediate 7.5 15.5 13.2 15.5 2.2 2.2 1.4 1.7float 2.8 10.4 15.9 9.5 1.9 1.6 1.1 1.5

average growth (1980-2007)average inflation (1980-2007)

Summary:

1) for inflation float exchange rate is the best choice

2) for growth intermediate regime maybe the best choice

REER strengthening of commodity-countries(from january 2009)

0%

5%

10%

15%

20%

25%

NOK MXN ZAR RUB CAD AUD

Still huge ruble dependence on oil price

19

21

23

25

27

29

31

33

35

37

1/1

/08

2/1

/08

3/1

/08

4/1

/08

5/1

/08

6/1

/08

7/1

/08

8/1

/08

9/1

/08

10/1

/08

11/1

/08

12/1

/08

1/1

/09

2/1

/09

3/1

/09

4/1

/09

5/1

/09

6/1

/09

7/1

/09

8/1

/09

9/1

/09

10/1

/09

11/1

/09

30

50

70

90

110

130

150

170

RUB Curncy Oil (WTI)

Bicurrency basket floating bands

35

36

37

38

39

40

41

09

.02

.09

16

.02

.09

23

.02

.09

02

.03

.09

09

.03

.09

16

.03

.09

23

.03

.09

30

.03

.09

06

.04

.09

13

.04

.09

20

.04

.09

27

.04

.09

04

.05

.09

11

.05

.09

18

.05

.09

25

.05

.09

01

.06

.09

08

.06

.09

15

.06

.09

22

.06

.09

29

.06

.09

06

.07

.09

13

.07

.09

20

.07

.09

27

.07

.09

03

.08

.09

10

.08

.09

17

.08

.09

24

.08

.09

31

.08

.09

07

.09

.09

14

.09

.09

21

.09

.09

28

.09

.09

05

.10

.09

12

.10

.09

19

.10

.09

26

.10

.09

02

.11

.09

Bicurrency basket (RUB per basket) Floating bands

Volatility of bilateral exchange rates(day-to-day basis, %)

BASKET USD EUR GBP RUB JPY BRL AUD UAHBASKET 0,45 0,40 0,78 0,29 0,87 0,82 0,71 1,59

USD 0,45 0,00 0,79 1,12 0,98 0,90 1,24 1,16 2,07EUR 0,40 0,85 0,00 1,07 0,77 1,21 1,12 0,89 2,31GBP 0,78 1,12 1,03 0,00 1,30 1,49 1,20 0,89 2,40RUB 0,29 0,98 0,77 1,30 0,00 1,40 1,19 1,02 2,37JPY 0,87 0,90 1,20 1,50 1,40 0,00 1,67 1,64 2,32BRL 0,82 1,24 1,12 1,20 1,19 1,67 0,00 0,98 2,26AUD 0,71 1,16 0,87 0,90 1,02 1,65 0,98 0,00 2,44UAH 1,59 2,12 2,35 2,43 2,37 2,36 2,26 2,46 0,00

maximum volatility for «row» currency across «column» currencies

minimum volatility for «row» currency across «column» currencies

CBR foreign currency interventions

-75000

-65000

-55000

-45000

-35000

-25000

-15000

-5000

5000

15000

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

Jan-

09

Feb

-09

Mar

-09

Apr

-09

May

-09

Jun-

09

Jul-0

9

Aug

-09

Sep

-09

Oct

-09

BoR interventions, mln. $ BoR regular FX purchases, mln. $ BoR regular FX selling, mln. $

Factors of inflation in Russia

Significant decrease of households demand and investments is the main factor of disinflation now

The effect of exchange rate pass-through after ruble depreciation has been fully translated into domestic prices. Current appreciation of ruble is a factor of disinflation for a short-term perspective

Monetary policy easing will determine growing inflation risks in 2nd half 2010

CPI and monetary aggregate dynamics

0

2

4

6

8

10

12

14

16

18

20

Jan-0

4

Apr-

04

Jul-04

Oct-

04

Jan-0

5

Apr-

05

Jul-05

Oct-

05

Jan-0

6

Apr-

06

Jul-06

Oct-

06

Jan-0

7

Apr-

07

Jul-07

Oct-

07

Jan-0

8

Apr-

08

Jul-08

Oct-

08

Jan-0

9

Apr-

09

Jul-09

Oct-

09

Jan-1

0

Apr-

10

Jul-10

Oct-

10

Jan-1

1

Apr-

11 -50

-30

-10

10

30

50

70

90

CPI YOY, % M2 lagged YoY, % (RS)

5%

5%

25%

15%

50%

International money market interest rates

0

5

10

15

20

25

Bel

orus

sia

Pak

ista

nS

erbi

aA

rmen

iaK

uwai

tR

oman

iaB

razi

lE

gypt

Icel

and

Tad

jikis

tan

Tur

key

Mex

ico

Hun

gary

Vie

tnam

SA

RM

olda

via

Indo

nesi

aR

ussi

aC

olum

bia

Phi

lippi

nes

Indi

aA

ustr

alia

Kaz

akhs

tan

New

Zea

land

Pol

and

Sou

th K

orea

Ukr

aine

Mal

aysi

aC

hina

Slo

vaki

aU

AE

Nor

way

Cze

ch R

epub

licT

haila

ndP

eru

Den

mar

kIs

rael

Latv

iaS

audi

Ara

bia

Tai

wan UK

Chi

liE

US

wed

enC

anad

aU

SA

Japa

nS

witz

erla

ndH

ong

Kon

g

Money market rates Refinance rate

CBR interest rate band

4

5

6

7

8

9

10

11

12

13

14

01.0

3.09

08.0

3.09

15.0

3.09

22.0

3.09

29.0

3.09

05.0

4.09

12.0

4.09

19.0

4.09

26.0

4.09

03.0

5.09

10.0

5.09

17.0

5.09

24.0

5.09

31.0

5.09

07.0

6.09

14.0

6.09

21.0

6.09

28.0

6.09

05.0

7.09

12.0

7.09

19.0

7.09

26.0

7.09

02.0

8.09

09.0

8.09

16.0

8.09

23.0

8.09

30.0

8.09

06.0

9.09

13.0

9.09

20.0

9.09

27.0

9.09

04.1

0.09

11.1

0.09

18.1

0.09

25.1

0.09

01.1

1.09

Refinance rate Central Bank of Russia Fixed Deposit rate

MOSPrime O/N rate Central Bank of Russia REPO Rate