1. The value of the ruble

We had predicted that the dollar would not surpass the 25.95 ruble mark in September. In fact, it has done just the opposite. By the end of the month it was lower than 25 rubles. The lower interest rate in the US had a large impact on the Russian currency market. The Central Bank showed once again that it is ready to reduce the rate of the dollar in Russia during periods of weakening on the international currency market. That way no one can accuse the bank of artificially raising the value of the ruble and hurting the Russian economy.

However there was no crisis in Russia when the dollar passed the 25 ruble marker. The dollar still has value both in Russia and in the world. But Russian authorities may not be satisfied with the way things are turning out. The dollar may have crossed the 25 ruble mark too early for their liking. What’s next? 24 rubles? That wouldn’t be stability, but a predictable and hurried rise in the value of the ruble.

Our forecast: in the interests of stability the dollar will cost more than 24.9 rubles.

2. Prices in Russia

We thought that consumer prices in September would grow by an insignificant amount, but that inflation would still passed 0.2%. This was indeed the case. In the first 20 days of September inflation was at 0.3%. For the entire month, the Ministry of Economic Development and Trade made a preliminary estimate of 0.4%.

Overall in January-September consumer prices in Russia have already risen 7.1%. If Russia is to meet its 8% target, then prices must rise no more than 0.9% in the last three months of the year. Last year prices grew 1.8% in the last three months, as a result inflation for the year was 9%. Last year prices rose by only 0.1% in September putting the January-September inflation at 72%, which doesn’t differ much from the situation this year.

Meeting this year’s inflation target is unlikely and authorities have already begun discussing the possibility of inflation greater than 8%, the matter now is how much greater. Once again they are announcing that import is playing a large anti-inflationary role and is stimulating competition on the domestic market. Simultaneously they are complaining rising agricultural prices and that these increases are being imported into Russia. They say that the increase is stimulated by strong consumer demand.

Our forecast: Due to consumers’ willingness to spend money, inflation in October will be around 0.5%.

3. Oil prices

We predicted that global oil prices would not be less than $70 per barrel. Our prediction was confirmed. In September oil prices surpassed $80 barrel for the first time in history. By the 20th of the month, oil had hit a record high of $83 per barrel. By the 26th, however this had passed and prices were below $80 again.

The price of oil has grown by 33% since the start of 2007. Record highs were caused by fears of supply shortages among American refineries, hurricanes that struck production sites on the Gulf of Mexico and an investment rush to oil futures caused by stock market jitters. The decrease in interest rates by the Fed also helped world oil prices. Market players feel that cheaper credit will indeed spur economic growth and US oil consumption will remain stable.

In their September meeting OPEC nations agreed to increase production quotas, only by 500,000 barrels a day, of course, which is not very significant. It seems that we’re doing everything to stave off an oil crisis, but we are guilty of the high prices ourselves. As always, in these circumstances the increase in oil production was more out of a desire to earn more while prices are high.

Our forecast: Oil prices will not drop below $76 per barrel in October

4. Dollar to Euro exchange rate

In our September prediction we said that the coming interest rate decrease by the Fed would put the cost of the euro at more than $1.36. This was indeed the case.

Players on the currency market think that the Fed will lower interest rates again to further stimulate the American economy and overcome the consequences of the world credit crisis. As such, one can bet on a weakening dollar. This attitude worried the leaders of some European countries who say that this would hurt European competitiveness and would only help European tourists visiting America. European officials have expressed hope that the US has not turned back from its traditional policy of a strong dollar and won’t let it currency fall into oblivion.

The European economic situation after the credit crisis is not great. Players on the currency market may want to lock in dollar profits and start to sell euros. They may use the expected October interest rate cut to do this.

Our forecast: September hurt the dollar so much that in October it won’t cost more than $1.38 to the euro.

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Garyegin Tosunyan, president of the Association of Russian banks:

1. The ruble is not strengthening right now. The ruble is stable against the average value of the dollar. This tendency will continue in October. The exchange rate will depend, as strange as it seems, on US policy. It will probably fluctuate around 24.8-25 rubles/$.

2. For the time being we’re on target to meet this year’s goal. October was never a month for seasonal fluctuations and so I thing inflation in October will be between 0.4-0.6%.

3. World oil prices have bee independent of economic conditions for some time now. The most important factor is politics. Right now US officials are interested in a stable American currency. But even if the value of the dollar drops sharply (which I highly doubt) oil prices won’t grow. Oil prices will stay where they were, at $76-78 per barrel.

4. Loosing confidence in the national currency is a big hit to the status and authority of a country in the world. The US always strengthened the dollar but now its better for the US to weaken the dollar in order to help the economy. In October US authorities will have to ask which is better for them: a loss of status or lifting the economy. Until this is decided the value will fluctuate around $1.38-$1.41/euro.

Yevgeny Fyodorov, chairman of the Economic Policy, Enterprise and Tourism Committee in the State Duma

1. Around 25 rubles/$. Right now the dollar is dropping against all currencies and is going through a bit of tension because of the mortgage crisis and general overload on the currency.

2. I think that inflation will be within the official forecast. The government has to have enough strength to contain inflation and by the end of the year it should be 8%. The most important factor in controlling inflation should be the Central Bank’s tariff policy.

3. Prices are growing rapidly and, in part, political factors are influencing them. For example, the unsolved situation in Iran and the American problem in Iraq. But I don’t anticipate a sudden jump. October oil prices will not vary much from September: $80/barrel.

4. I expect that the euro/dollar relationship will be stable. Everything that you could do, including interest rate decreases in the US, was already done in September. There won’t be any new changes and the exchange rate will be around $1.35/euro.

Nikolai Shklein, governor of the Kirov Region

1. I think we’ve seen the end of the dollar’s weakening in September since the mortgage crisis has calmed down. The dollar will be around 25-25.15 rubles.

2. I believe the Ministry of Economic Development and Trade that base inflation in October won’t exceed 0.2% in order to keep us yearly inflation within 8%.

3. After oil prices hit their historical maximum in September the market will calm down a bit. The political situation in the world is also calm, so I don’t foresee any sudden shifts.

4. I don’t think that the euro will continue to strengthen. There just aren’t the prerequisites for that. More than likely the relationship will be the same that it was in September: $1.38-$1.41/euro.

Vladimir Shcherbakov, board chairman, Avtotor group

1. The ruble may strengthen another 4-5% against the dollar to about 24 rubles/$. At the moment this isn’t a result of the Russian government, but of the unstable dollar.

2. Inflation will surpass the planned parameters and be a little more than 1%. The country is unstable as a result of the government change and an overdependence on exports and imports. With a falling dollar and strengthening ruble inflation will exceed the target figure.

3. World oil prices will stay at $79-$80/barrel. Oil production is not increasing despite consumption growth. Its energy prices, not economics, that dictate politics right now.

4. The dollar’s exchange rate will continue to drop despite its danger for US financial authorities. They may undertake a series of steps to balance the situation. The exchange rate will be $1.44-$1.45/euro.