President Vladimir Putin is selecting from three main candidates to fill the post of central bank chairman when Sergey Ignatiev’s third and final term ends in June, three officials with knowledge of the talks said.
Former Finance Minister Alexei Kudrin, central bank First Deputy Chairman Alexei Ulyukayev, and Mikhail Zadornov, head of VTB Group’s retail-lending unit, are being considered for the nomination, which must be made by the end of March, the three officials said, declining to be identified because the matter isn’t public. Oleg Vyugin, a former central bank first deputy chairman, has also been discussed, one of the people said.
The race pits two former finance ministers against the central bank’s most outspoken voice in an escalating clash with the government over the need for monetary stimulus. Bank Rossii’s first new leader in more than a decade will also oversee its merger with the country’s financial regulator.
“Markets would be happy about a conservative and technocratic governor,” Viktor Szabo, who helps manage about $10 billion in emerging-market debt at Aberdeen Asset Management in London, said by e-mail yesterday. “The rumors are about Kudrin, who the market would be very happy about. I think Kudrin could be more independent than Ulyukayev.”
Ulyukayev, Zadornov and Kudrin declined to comment on the nominating process, as did the central bank’s press service. Putin’s spokesman Dmitry Peskov declined to comment on any names, saying that there’s no shortlist.
“It’s too early,” he said by phone from Moscow yesterday.
Ignatiev, 65, exits amid the biggest-ever expansion of the monetary authority’s mandate that will give it oversight of banks and markets. With the world’s fourth-biggest reserves already under its management, Bank Rossii will cement its place as the country’s most potent economic institution not directly under government control.
Ignatiev was reappointed to a maximum third four-year term by then-President Dmitry Medvedev in 2009. In Russia, the president appoints the central bank chairman, who must be approved by the lower house of parliament.
Ignatiev has presided over the regulator since 2002, guiding it through the 2008 global liquidity crisis and loosening controls over the ruble before a shift to inflation targeting by 2015. Russia, which holds the Group of 20 presidency this year, will be leading discussions on implementation of new bank-oversight rules.
Kudrin, 52, is a long-time ally of Putin and one of the few Russian politicians the president has publicly called a friend. He left the government in September 2011 after more than a decade as finance minister because of a public feud with Medvedev over military spending.
Ulyukayev, 56, who joined the central bank as a first deputy chairman in 2004, was a deputy to Kudrin in the Finance Ministry, along with Ignatiev. He said last week that additional easing of monetary policy would be counter-productive, challenging calls by officials including Finance Minister Anton Siluanov for cheaper borrowing costs to stimulate growth.
Zadornov, 49, who was finance minister in 1998 when Russia’s government defaulted on $40 billion of domestic debt, has been president of VTB Group’s retail unit, VTB24, since 2005.
To succeed, Ignatiev’s replacement will have to bridge a widening gap between the central bank’s efforts to fight inflation and calls for monetary easing by top government officials including Siluanov and First Deputy Prime Minister Igor Shuvalov. A “huge argument” between the government and the central bank has been raging over economic priorities, Shuvalov said in a Jan. 18 interview.
Russia, the largest emerging economy to raise borrowing costs last year, left the refinancing rate at 8.25 percent for a fourth month on Jan. 15. Policy makers also dropped a phrase that money-market rates are acceptable for the “nearest future,” which Ulyukayev said opens the door for either increases or decreases as soon as next month.
Bank Rossii probably won’t get enough new information in the “near future” to justify a change in borrowing costs from current levels, Ulyukayev said in Davos, Switzerland, RIA reported today.
Investors, who switched to betting on lower interest rates in November for the first time in six months, are now pricing in a 16 basis-point, or 0.16 percentage point, cut in rates over the next three months, according to forward-rate agreements tracked by Bloomberg. That’s down from 35 basis points the day before the rates meeting in December and compares with a jump of as much as 54 basis points forecast on May 17.
“Cabinet concerns over slow economic growth will translate into stronger pressure on the Russian central bank to reduce interest rates,” Natalia Orlova and Dmitry Dolgin, economists at Alfa Bank in Moscow, wrote in an e-mailed research note yesterday. “We thus doubt that the central bank’s independence will improve following the current chairman’s planned retirement.”