May 15. The Bank of Russia introduced daily currency intervention on May 14, which is expected to rise near the end of a month when banks lack ruble liquidity due to tax payments. An additional effect from such operations will be increased volatility of the ruble exchange rate within CBR's target band and lower inflow of short-term speculative capital into Russia. CBR reported today that in addition to operations on the domestic forex market intended to limit intraday fluctuations in the bi-currency basket value, regular intervention will begin and their amount is to be determined taking into account conditions on the domestic forex market, valuation of the status of Russia's balance of payments and progress in execution of the federal budget. "We expect the ruble exchange rate to become more market-oriented and more flexible. It should better reflect the real balance of currency supply and demand and create fewer incentives for short-term fluctuations of capital inflow/outflow and in this sense to stabilize money flow trends and therefore create better conditions for curbing inflation. This is a measure which creates the prerequisites for large-scale transition to inflation targeting in the mid-term, i.e. over next 2-3 years", First Deputy CBR Chairman Alexei Ulyukaev said. Earlier, he said the transition to inflation targeting in full and introduction of the floating ruble rate would happen within the next three years. However, elements of the new forex regime will be introduced gradually. CBR's exchange rate policy will remain unchanged, notwithstanding the new measure. CBR does not abandon pegging the ruble to the bi-currency basket and regular interventions will be implemented within the target band supported by the Bank of Russia in view of the floating ruble exchange rate. Now CBR can buy currency not only when the bottom level of the target band is reached, but also within this band. The amount of daily intervention will be predetermined by the budget policy and if the budget withdraws considerable amounts of liquidity from banks via tax payments, the amounts of CBR's currency purchase will largely aim to support sufficient liquidity at banks. "This means that in the second half of the month we can expect CBR to be more active than in the first half when tax payments are lower. However, the Bank of Russia is not obliged to strictly adhere to these amounts", Ulyukaev said.