Ruble exchange rate not significant factor in rate decision; too early to speak of pronounced weakening trend - Central Bank of Russia governor

MOSCOW. March 20 (Interfax) - The weakening of the ruble exchange rate is explained by two factors - low oil prices in January-February and the suspension of the fiscal rule, but the exchange rate was not a significant factor in the decision on the rate, and it is too early to speak of pronounced trends, Central Bank of Russia Governor Elvira Nabiullina said at a briefing following the meeting of the CBR's board of directors, at which it cut the key rate from 15.5% to 15.0%.

"The ruble has weakened over the past few weeks, but its exchange rate is hovering in the range of the previous year. It is too early to speak of a clear trend forming. The exchange rate was not a determinant factor for our today's decision," she said.

"The [ruble's] latest depreciation that we have seen is in our opinion due to a combination of two factors. I wouldn't call them fundamental. First, the oil price was very low in January-February, and in our view, the lag in transmission between the oil price and the receipt of foreign exchange earnings is about two months. We are now seeing the consequences of that relatively low oil price in January. And this is combined with the second factor, the suspension of the fiscal rule, because ordinarily if the price falls below the base price, then foreign currency is sold from the National Wealth Fund, which partially offsets these effects. This did not happen. Now the price of export oil is already higher, so we will see what happens next with the resumption or non-resumption of operations under the fiscal rule," Nabiullina said, describing the reasons for the ruble's depreciation.

Central Bank Deputy Governor Alexei Zabotkin said that "exchange rate dynamics in recent days are a fine example of how important the mechanics of the fiscal rule are to cushion the economy against oil price volatility."