Evgeny Gavrilenkov, Chief economist at Troika Dialog, says Russia’s banking system doesn’t need additional liquidity. It simply distorts the real picture:

“First of all the Central Bank needs to stop injecting cheap liquidity into the system, and then wait and see for a while, what will happen with the economy once money starts flowing. And maybe all those efforts to support this or that 51 or 20 or 100 banks or whatever may not be needed. Banks may recover on their own, if the situation normalizes.”

The Rouble has lost more than a third of its value since August in what the Central Banks calls gradual devaluation. Two weeks ago, the regulator promised to keep the Rouble stronger than 41 to a euro/dollar basket. On Thursday, less than two weeks later, it had briefly breached that limit.

Most banks use the cash they get from the State to buy euros and dollars, which experts say is adding pressure to the Rouble. Sergey Guriev , Rector at the New Economic School insists the answer is the regulators firm commitment to keeping the local currency within the band it has set:

“As long as bankers expect the Rouble to become weaker in the coming months, or at least substantially weaker, the bankers will sit on dollar assets.”

Martin Gilman, Professor at the Higher School of Economics. believes the economy’s biggest threat now is not its weak currency, but aggravating inflation already running at 13% – and combating it should become the government’s priority:

“The Rouble is about at the rate it was at in 2004 in real terms. In 2004 the oil price was an average of about $35/bbl, more or less like now. And yet you had GDP growth of 7% in real terms. You can do it again, potentially, with the real Rouble rate brought in line with the lower oil price, provided you keep inflation under control. And that should be the real priority.”

Russia has burned through an estimated $200 billion of its reserves to support the currency, shield the banking system from the liquidity crisis, and the economy from a global downturn. The tightening of liquidity holds out the prospect that if it shakes out some of the short positions on the Russian currency, policymakers can get to grips with inflation while the economy starts work from a position of greater relative certainty on the Rouble.