Yu Fenghui: It Is Difficult To Save Russia'S Economy By Monetary Policy Alone.

The massive devaluation of the rouble has brought unprecedented impact on the Russian economy. The first is that domestic inflation is rising rapidly. In November, inflation rose by 9.1% in Russia, and if the rouble continues to depreciate, the inflation rate will soon exceed 10%. The consequences of inflation not only make domestic prices rise, increase people's living costs, increase people's living burden, but also looting people's wealth.

The devaluation of Russian currency has made the domestic economy worse. The devaluation of the currency is beneficial to exports to a certain extent, but the export prices of Russia, mainly oil and other energy resources, are falling sharply. Especially, the price of light crude oil in New York has fallen below 55 US dollars per barrel. The greater the loss of Russian exports, the less the exchange rate will be. Inflation is a nightmare for the domestic real economy. Russia's economic growth has seen zero growth.

To cope with the crisis, the most important means of Russia's current monetary policy is to raise interest rates and sell dollars to stabilize the rouble exchange rate. In December 11th, in response to high inflation, the Central Bank of Russia announced that the key interest rate rose from 9.5% to 10.5%. In December 16th, the Central Bank of Russia raised its key interest rate from 10.5% to 17%. This is the second central bank's interest rate hike in less than a week, which aims to prevent the rouble from devaluing and preventing inflation. However, raising interest rates is a double-edged sword. Raising interest rates to raise the value of the currency can ease residents' selling of roubles, play a stabilizing role in money and slow inflation. But raising interest rates will further stifle economic growth, raising the financing cost of domestic enterprises and increasing the burden of domestic enterprises.

Selling dollar against rouble exchange rate Going down is not a radical solution. Russia currently has a total foreign reserves of less than 400 billion dollars, and next year is the peak of its international debt repayment. Dumping the US dollar to save the ruble exchange rate will probably drain the US dollar reserves and eventually lead to the collapse of the Russian economy.

The US Federal Reserve is stepping into the interest rate increase channel, and the US dollar has entered. appreciation Cycle, which will continue to prompt the rapid depreciation of the rouble, will offset the effectiveness of monetary policy such as the central bank's interest rate hike. It is difficult to withstand the selling pressure when it is stored for about 400000000000 dollars. On the one hand, residents and investors fear the ruble's depreciation, which drives them to sell roubles and hold the dollar. On the other hand, the Central Bank of Russia intervenes in the exchange rate to sell dollars. Even more fatal is that Russia's foreign reserves are basically out of the state, and the oil price of foreign exchange earnings has plummeted, which has greatly reduced its US dollar foreign exchange inflow. A huge loss of US dollar and a huge reduction in foreign reserves make Russia's foreign exchange reserves and even the whole economy more and more worrying. This situation can not be solved by relying on monetary policy and individual advance.

save Russian economy The radical solution to the downturn, financial risks and foreign exchange plight is to seek international cooperation quickly and improve relations with the developed economies such as the European Union and the United States from the political level. On the one hand, the international oil price will be stabilized as soon as possible, and the trend of further decline will be prevented, so as to stabilize Russia's foreign exchange reserves and replenish its continuous "ammunition" to intervene in the exchange rate. Once the ruble exchange rate stabilizes, all the problems of the Russian economy will be solved. On the other hand, seek international cooperation to seek financial assistance from the IMF or other economies, so that Russia can survive the current economic and financial difficulties. The aim of the International Monetary Fund is to save the nation, and the International Monetary Fund should give a helping hand to Russia at the most urgent stage. Of course, the premise is that Russia must take negotiations with the international community to settle disputes as soon as possible on international issues such as Eastern Ukraine. Compromise and strategic concession are often the embodiment of wisdom.

Russia, as an open power, including its exchange rate and currency exchange, has been completely marketization and internationalization. Under such circumstances, the domestic economy is constrained by the international political and economic climate. Even if the domestic economic and financial problems are not resolved by Russia alone, it must rely on international forces, which is a major characteristic of the open economy. Creating a relaxed international political and economic environment as soon as possible is the only way to solve the current Russian economic and financial crisis.