Russian central bank rejects lawmakers’ requests to tighten currency restrictions

By Elena Fabrichnaya and Alexander Marrow

MOSCOW (Reuters) – Russia’s Central Bank Governor Elvira Nabiullina on Wednesday rejected lawmakers’ requests to tighten currency restrictions in response to rouble weakening, warning of sharp devaluations and sticking to the bank’s inflation-targeting regime.

The Russian currency accelerated a months-long slide last week, tumbling to a one-year low at 83.5 against the dollar, due in part to exports falling in value terms and imports recovering quite quickly, Nabiullina told lawmakers in the State Duma, Russia’s lower house of parliament.

Russia’s current account surplus shrank by around 73% in January-March on an annual basis to $18.6 billion. Current export revenues also relate to a period when oil prices were lower than they are now, Nabiullina said.

Officials extolled the rouble’s strength in 2022 as evidence of Russia’s economic resilience to sanctions pressure, but as the currency has lost almost 25% since an oil price cap on Russian exports came into force in early December, lawmakers requested stronger capital controls.

“We know from our country’s experience that attempts to manage the exchange rate lead to sharp devaluations, in fact, to financial crises,” Nabiullina said. “The lower inflation is, the more stable the exchange rate.”

The central bank’s inflation target is 4%.

“In our view, introducing currency restrictions here will worsen conditions for Russian businesses, for the Russian economy in terms of settlements, and, ultimately, the economy’s growth rate.”

Nabiullina maintained the bank’s hawkish stance, warning of inflationary risks, a move the market may interpret as an intention to hold or raise rates at its next board meeting on April 28.

“The picture now is somewhat more pro-inflationary that it was in the second half of last year,” Nabiullina said. “Several factors are affecting this.

“External factors – sanctions restrictions are constraining exports,” she said. “The exchange rate, which was strengthening last year and curbing inflation, this year is likely to have a pro-inflationary impact.”

(Reporting by Elena Fabrichnaya; Writing by Alexander Marrow; Editing by Jan Harvey, Kirsten Donovan)