The ruble eased Thursday after the Central Bank stepped up rhetoric against the currency’s 2 1/2 month-long rally, forecasting more rate cuts and proposing measures to curb speculative capital inflows.
Russia could consider various “soft” measures to curb inflows, which could include changes in reserve requirements, caps on banks’ open foreign currency positions and also broader regulation on cross-border action such as taxes, Central Bank First Deputy Chairman Alexei Ulyukayev said Thursday.
But, when asked by reporters whether Russia could follow in the footsteps of Brazil, Ulyukayev replied: “It is just an example. … There could be such an option, there could be various other options. But there is no such proposal, no plan. It is a basis for discussion.”
“There is no deadline, no criteria, no red flags [on the introduction of measures to curb inflows],” he added.
Emerging stocks dropped by 1 percent Thursday and currencies weakened as investors eyed the spread of capital controls in emerging markets.
Brazil, which last month introduced a tax on foreign investment in its bonds and stocks, took another step Wednesday aimed at containing the appreciation of its currency, unveiling a tax on certain trades involving American Depositary Receipts issued by Brazilian companies. Ulyukayev’s boss, Sergei Ignatyev, said Wednesday that any Russian measures would be “soft,” reiterating his opposition to the reintroduction of capital controls.
“All this news flow — yesterday, today — is negative for the ruble. And it is possible that with these verbal interventions the Central Bank is trying to limit the appreciation of the ruble,” said Vladimir Osakovsky, an analyst at UniCredit Bank. He added that there was “no reason to disbelieve” authorities’ assertions that there will be no capital controls.
Ulyukayev also said the next interest rate cut could come before the end of the month and the issue will be discussed at the Central Bank’s Nov. 24 board meeting. UniCredit’s Osakovsky said there would be scope for at least 100 basis points of further rate cuts by year-end.