The Governor of the Central Bank of Russia Elvira Nabiullina sees current market conditions as fit to restart FX purchases off the market in January, news agencies reported citing Nabiullina's comments made during the VTB Bank’s Russia Calling! annual investment forum.

Previously in 2018 the CBR was using the Finance Ministry's extra oil revenues to buy currency off the open market. However, amid ruble volatility in August the CBR halted currency interventions and extended the pause until the end of 2018 in September's key interest rate policy decision.

The decision was made at the same time as the central bank unexpectedly hiked overnight rates by 25bp to 7.5% and the announcement got buried in the reporting and comment on the reversal of the previous easing of monetary policy. Natalia Orlova, chief economist at Alfa Bank, accused the CBR of burying the news in the rate hike decision on purpose as it represented a major U-turn in policy by the regulator.

“The decision to raise the key rate looks like a cover-up,” Natalia Orlova, chief economist at Alfa Bank said to Bloomberg at the time. “It allowed them to distract attention from the announcement on halting the FX purchases and to create the impression that the central bank is regulating the economy with the help of interest rates.”

Despite the change in policy by the CBR, the Finance Ministry, on the other hand, has continued to purchase foreign currency in record-high volumes, but the cash didn't make it to the market and was absorbed on its CBR's accounts. 

Some analysts criticised the CBR decision as a deviation from the policy of free-floated national currency, arguing that regulator's interest rate hike coupled with regulating FX interventions seems to be motivated by the weakening of the ruble, especially given still low inflationary risks.

Now Nabiullina said that and a decision on "catch-up purchases" for all the sterilised cash since August would be made after the "regular" weekly FX purchases will have started.

"We believe this announcement implies that the CBR sees the current state of the FX market as sufficiently robust, which in turn diminishes the probability of an interest rate hike in December," VTB Capital commented on November 29. Capital Economics said in a note a day earlier that it is also expecting the CBR to go back to cutting rates, but probably not until 2020.

VTB estimates the accumulated "pent up" demand at approximately $30bn over August–December 2018, making them "a category of their own". The bank expects the CBR to make up its mind about these FX purchases at the core policy meeting in March.

Nabiullina's other comments allow to assume that at the very least purchases will be spread out until 2021, making the maximum addition to the regular purchase $1.4bn per month, on VTB's numbers.

This would be in line with the Ministry of Economic Development on November 28 saying that the ruble is expected to weaken gradually and economic growth to pick up after 2019. The rouble rate is forecasted to average RUB61.7 to US dollar in 2018, weaken to RUB63.9 in 2019, and to RUB75.2 in the long-term perspective through 2036. As of November 28 ruble traded at RUB67.27 to US dollar.