Russia to Introduce 200 and 2000 Ruble Banknotes in 2017

Started by Bimat, April 13, 2016, 06:05:36 AM

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Bimat

Central Bank of Russia intends to issue 200 and 2000 ruble banknotes in late 2017 to 'simplify' cash payments. The official press release in Russian is here. (Sorry, I couldn't find the English version of same)

Aditya
It is our choices...that show what we truly are, far more than our abilities. -J. K. Rowling.

Figleaf

As the site you link to notes: Issue of banknotes intermediate denominations, which include notes of 200 and 2000 rubles, is economically justified in the case when inflation in the economy does not exceed 4-6%. According to the forecast of the Bank of Russia, the annual inflation will reach the target level of 4% at the end of 2017.

However, in the words of Yogi Berra, predicting is difficult, especially the future. Look here for recent inflation data. It looks good, until you realise that the scale of the graph ends at 6%, not 0%. I would expect that the Bank of Russia has a target inflation rate of 3 to 4%. Logically, there are three scenarios:

  • Inflation continues to decline and growth picks up again. Unless there's a reason why inflation has come down and that reason remains valid, this is pure extrapolation and wishful thinking. It is not impossible, though as food prices seem to have contributed to this development: sanctions are no longer working.
  • Inflation thunders down too far and Russia joins much of the rest of the world in deflation and stagnation.
  • Inflation picks up again. This is the most unlikely scenario, but it is not impossible.
Meanwhile, inflation is a game of expectations. If by this issue, the Bank of Russia can set a tone where people come to expect the happy outcome, that will help bring the happy outcome about. Just to note that this would not solve all problems, but it will help get Russia back to normality or at least acceptance that the current situation is the new normal. Russia has given itself two years to achieve that.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.