A floating exchange rate regime is currently underway in Russia. This means that the ruble exchange rate is not fixed and there are no targets set either for the exchange rate level or its fluctuations. The ruble exchange rate is determined by supply and demand in the FX market. The exchange rate flexibility helps Russian economy adjust to changing external conditions by mitigating their impact.
Under normal conditions, the Bank of Russia does not intervene to influence the ruble exchange rate. At the same time, the regulator closely monitors developments in the FX market and may resort to foreign exchange operations to maintain financial stability.
At present, Russia employs a floating exchange rate regime, which
means that the ruble exchange rate against foreign currencies is set by the
market, i.e. the ratio between the demand for foreign currency and its supply in
the FX market. Any factors disturbing this ratio initiate exchange rate
fluctuations. In particular, exchange rate dynamics may be influenced by changes
in export and import prices, inflation levels and interest rates in Russia and
other states, economic growth rates, investors’ sentiment and expectations in
Russia and world-wide, changes in monetary policies pursued by central banks in
Russia and other countries. (Data on the ruble exchange rate dynamics and its
underlying factors are presented in the quarterly
Monetary Policy Report).
Thus, the ruble exchange rate is not set by the government or the central
bank, it is not fixed, nor there are any targets set for its level or rates
of change. Normally, the Bank of Russia does not conduct FX interventions to
influence the ruble dynamics. This is by what the floating exchange rate regime
differs from numerous variations of the managed exchange rate regime.
According to Article 34.1 of the Federal Law ‘On the Central Bank of the
Russian Federation (Bank of Russia)’, the principal objective of the Bank of
Russia’s monetary policy shall be to protect and ensure stability of the ruble
by way of maintaining price stability. Stability of the national currency
shall mean ensuring the ruble’s purchasing power on the basis of a stable and
low inflation, rather than its fixed rate against other currencies. Under
low inflation, the quantities of goods and services purchased for the same
amount in rubles shall largely stay unchanged over a long period of time. This
supports the confidence of households and businesses in the national currency
and creates favourable environment for the economic growth in Russia.
Floating exchange rate is an important component of
which implies that the ensuring of price stability shall be the main objective
of the central bank. The Bank of Russia switched to the floating exchange rate
regime in November 2014. Prior to this transition, for many years the Bank of
Russia had gradually increased exchange rate flexibility and had consistently
reduced its interference in the domestic FX market. The transition to the
floating exchange rate regime was a phased-out process in order to facilitate
market participants’ adaptation to exchange rate fluctuations driven by the more
flexible exchange rate.
For more detailed account of the Bank of Russia’s exchange rate policy please
The floating exchange rate functions as an ‘automatic stabiliser’ for the
economy, which is its main advantage compared with the managed exchanged rate.
It facilitates the economy’s adaptation to changes in external conditions by
mitigating the impact of external factors.
For example, growing oil prices make the ruble appreciate, which lowers the
risks of economy overheating; whereas, falling oil prices weaken the ruble,
thereby supporting domestic producers through expanding exports and stimulating
Another example of the floating exchange rate operation as an ‘automatic
stabiliser’ is its effect on cross-border capital flows. In case of a fixed or
managed exchange rate any changes in interest rates made by other countries and
ensuing changes in the difference between internal and external interest rates
may trigger the inflow or outflow of speculative capital. Under the floating
exchange rate regime, market participants-driven increase in the demand for or
the supply of foreign currency as a result of changes in the difference between
internal and external interest rates leads to respective exchange rate movements
rendering speculative operations unprofitable.
By increasing the economy’s dependence on external environment, the fixed or
managed exchange rate also makes the monetary policy dependent on other
countries’ policies and external economic situation. Under the managed exchange
rate regime, in response to changing external conditions the central bank is
forced to intervene to influence the domestic currency, thus adversely affecting
other economic parameters, including inflation rate.
The floating exchange rate allows the Bank of Russia to conduct an
independent monetary policy aimed at resolving domestic objectives, and
primarily – at reducing inflation.
At present, most developed countries pursue the floating exchange rate
The introduction of the floating exchange rate regime means that the Bank of
Russia has abandoned the practice of regular FX interventions to influence the
ruble exchange rate. This regime assumes that in normal conditions the central
bank does not intervene in the market processes, thus letting the ruble exchange
rate act as the ‘automatic stabiliser’.
However, the Bank of Russia is set to closely monitor the situation in the FX
market remaining prepared for foreign exchange operations (including
on a reverse basis)
in order to maintain financial stability.
As the threat to financial stability, the Bank of Russia views the exchange
rate dynamics that may form sustainable depreciation expectations, enhanced
demand for FX cash, growth in deposit dollarisation and a considerable
deterioration in the financial stability among credit institutions and
The Bank of Russia may also conduct operations in the FX market to replenish
international reserves. Sizeable international reserves enable the Bank of
Russia to maintain financial stability and ensure the uninterrupted external
debt servicing during several years even under an unfavourable economic
Replenishment of international reserves shall be conducted in small amounts
so that not to impact the ruble exchange rate. When making decisions on foreign
currency purchases the Bank of Russia takes into account the ruble dynamics and
the situation in the Russian economy and the balance of payments.
For detailed information on Bank of Russia operations in the FX market please
Information on the Bank of Russia’s exchange rate policy and factors
influencing the ruble exchange rate over various periods of time is provided in
Monetary Policy Reports,
Guidelines for the Single State Monetary
Policy, Bank of Russia Annual Reports (section
Besides, each exchange rate policy decision is followed by a press release in
the sub-section Press releases on monetary policy of the section Monetary
policy. The sub-section The Bank of Russia FX policy of the section Monetary
policy also contains frequently asked questions regarding the Bank of
Russia FX policy issues.
Detailed information on Bank of Russia operations in the FX market is
published in the section Monetary Policy; data on the volumes of operations and
parameters of the Bank of Russia exchange rate policy are published in the
sub-section Foreign Exchange Interventions of the section Statistics /
Monetary policy instruments of the Bank of Russia and banking sector liquidity
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