1. What will happen to the rouble exchange rate?

In our April prognosis we indicated that the dollar’s weakness on the world market will prevent it from rising above 24 roubles in Russia March. That prognosis was completely correct. The dollar strengthened from time to time, but the rise was insufficient to let it cross the 24 roubles border. At the end of the month its rate was 23.65 roubles.

It need be said that under the circumstances of the global financial crisis and the trend to provide aid to commercial banks lacking in liquidity, the Central bank of Russia constantly recalls that in Russia it’s the currency market that provides liquidity to the banking system – the Central bank buys dollars and throws roubles in the Russian economy. April the Central Bank stressed that there is also a mechanism adding up to the current scheme – the allocation of temporarily free budget funds.

Besides, The Central Bank has recently emphasized that the rouble won’t be always able to strengthen – the impartial data of the balance of payment (in particular, the increase in imports) says that the dollar will strengthen some day. But it won’t happen soon. So far the Central Bank wouldn’t confine itself to a floating exchange rate of the rouble because it fears that the rouble will strengthen too much, with dollars still in abundance. So now the Central Bank continues restraining the growth of the rouble exchange rate so that not to give rise to the reproaches for the excessive stimulating of imports and influencing negatively the competitiveness of Russian enterprises. But if the dollar falls precipitately in the world markets, you can do nothing about it – you can only decrease its rate in Russia.

Our prognosis: Restraining the growth of the rouble by means of buying dollars and maintaining the liquidity of the banking system will prevent the dollar from falling below 23.2 roubles/$.

2. What will happen to prices in Russia?

We pointed out that the prices that sunk the last plan ensuing its overhaul would grow by more than 0.7% in April by inertia. Our prognosis appeared correct. The final results of the month haven’t been calculated yet, but according to Rosstat, the inflation in Russia amounted to 1.4% from 1-28 April.

So inflation hit the 6.3% mark within the beginning of 2008, and it has exceeded 14% in annual terms. It need be added that the government still wants to keep within its new plan – 10% for 2008. At the same time officials stress that here prognosis, not plan, is meant, and prognosis may fail to come true. It shows that the government has become more careful in its anti-inflationary policy. The government means that first, it is not the only one to blame for the inflation – the world foodstuff crisis is also privy to it, and second, under the world crediting crisis, supplying banks with money plays a special role – and here you should reckon with inflationary consequences.

Our prognosis: inflation will keep below 1% in May, and price tags won’t be changed that often.

3. What will happen to world oil prices?

We indicated that speculation on the oil market was gradually increasing, accompanied by temporary falls in price, and oil would not rise above $115 per barrel in April. Correct.

To the end of April the world oil price hit the $120 per barrel target, but then the predicted temporary decrease followed. Within a couple of days it fell more than by 5%. April 30 the American WTI fell by $2.17 per barrel and turned out to cost less than $115 - $113,46. The North American Brent was rated even cheaper - $112,4 per barrel.

Brokers in the world stock market, as usual, decided to keep the profit they gained from the previous records, and set to selling oil futures. But the speculation for the rise wouldn’t come to an end. It is not that easy to stop – international investment and pension funds invested too much in oil. We have often heard that it’s time for the oil price to fall because the real proportion of demand and supply in the world market doesn’t signify any deficit of oil. But brokers say frankly that the matter is financial speculation, which hardly depends on the true state of affairs in oil production and consumption. Here assumptions and conjectures matter. Early May everyone will take account of the supposition that another decrease of the Federal Reserve interest rate will inspire the growth of the U.S. and world economy, and will cause the increase in demand for oil.

Our prognosis: As a result of the speculation in May, the world oil prices will be above $114 per barrel.

4. How are the dollar and euro doing on the world market?

Our prognosis for April read: At a height of $1.60, the euro attracts speculators like a beacon and they will have their way; the euro will not fall below $1.52 in April. The prognosis turned out correct once again. Speculators hit the $1.60 target for the first time in history. Then the euro began to fall, but it didn’t fall below $1.52. At the end of the month the euro exchange rate was $1.563.

The American currency benefited from the fact that the U.S. GDP grew by 0.6% per annum in the first quarter of the year, which is quite a weak growth, but it indicates that the American economy managed to avoid the so much disputed recession. And since there has been no recession, the American currency might prove reliable.

The circumstance to impede the euro was the slowdown of inflation in the Euro-zone – to 3.3% per annum (in March it was 3.6% - the highest rate within the entire history of the Euro-zone). Consequently, the Central Bank of Europe has fewer incentives to raise the interest rate. At the same time speculators in the world currency market have been guided by the assumption that the currency of those states where the interest rate gets lower is likely to fall, and where the interest rate rises – to go up.

Finally, one of the key issues playing up to the dollar was the record the euro set: Since the $1.60 border has been crossed, speculators thought, it’s necessary to save the net profit before conquering new peaks. And they set to selling the expensive euros for the cheap dollars.

On the last day of April the U.S. Federal Reserve once again decreased the interest rate to inspire the American economy, which somehow managed to avoid recession. Which, in its turn, will inspire speculators wishing that the dollar would fall. And at the same time brokers usually speculate on forthcoming events, and now a further decrease in the interest rate appears less likely.

Our prognosis: Brokers decided that the dollar is not that bad, that is why in May the euro won’t cost more than $1.61.