In this March 19, 2021 picture, a man on the phone walks past the Russian Central Bank headquarters as the Russian flag flies in downtown Moscow. KIRILL KUDRYAVTSEV MOSCOW Russia is considering buying the currencies of friendly countries such as China, India and Turkey to hold in the National Wealth Fund NWF, as it has lost the ability to buy dollars or euros due to sanctions, the central bank said on Friday.
The bank said that it was sticking to the policy of a free-floating rouble exchange rate, but stressed that it was important to reinstate a budget rule that diverts excess oil revenues into the rainy day fund.
In a report on its monetary policy for 2023 -- 2025, the central bank said there were various options on how to return to the fiscal rule and replenish the NWF, taking into account the Western sanctions against Russia.
The Russian Ministry of Finance is working on a possibility of implementing an operational mechanism for the replenishment of NWF in currencies of friendly countries yuan, rupees, Turkish lira and others, according to the central bank.
Russia previously purchased dollars and euros for the NWF, but not the other currencies under the budget rule. In early 2022, the fund stopped daily purchases of forex due to increased volatility in the rouble.
The finance ministry is responsible for the NWF, but it is part of the central bank's international reserves, which also include yuan. As of February, around $640 billion were frozen, of which nearly half was frozen under Western sanctions.
After two years of contraction, the Russian economy will return to growth in 2024, and inflation will slow to the 4 percent target by then, allowing the central bank to bring the key rate to the 5 -- 6 percent range in 2025, the central bank said.
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There is considerable uncertainty surrounding the Russian economy. The central bank said that the central bank said that the main challenge in the coming years is to create the conditions for a successful transformation of the economy.
The key interest rate, the main instrument of central bank monetary policy, will be 6.5 8.5 percent next year and decline to 6 -- 7 percent in 2024 and 5 -- 6 percent in 2025, down from 8% as of now, the bank forecasts in its base case scenario.