Russia Picks New Monetary Policy Chief as Currency Plummets

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Ksenia Yudaeva
Ksenia Yudaeva, outgoing first deputy governor of the Bank of Russia, had been in charge of monetary policy since she joined the bank in September 2013. Photographer: Simon Dawson/Bloomberg

Russia’s central bank replaced its head of monetary policy after President Vladimir Putin criticized the failure of emergency measures to halt ruble’s decline.

Dmitry Tulin, a former central bank official who also worked at the International Monetary Fund and Deloitte LLP, will take on Ksenia Yudaeva’s role as first deputy governor in charge of monetary policy, the Bank of Russia said in a statement yesterday. Yudaeva, who remains a first deputy to Governor Elvira Nabiullina, will focus on forecasting, strategy and financial stability, she told reporters in Moscow.

Yudaeva, who joined the bank in September 2013, was in charge of monetary policy as the regulator lurched from one crisis to another after Russia annexed Crimea from Ukraine last year. While policy makers deployed emergency steps including interest-rate increases and spent $88 billion in interventions to prop up the currency, Putin last month scolded the regulator for not reacting to the crisis more quickly.

“Expectations were that heads would roll after the fiasco over management of the exchange rate and monetary policy late last year,” Timothy Ash, an economist at Standard Bank Group Ltd. in London, said by e-mail.

The Russian currency weakened 0.5 percent to 65.1205 per dollar as of 1:14 p.m. in Moscow, extending its decline since the end of 2014 to 6.7 percent, surpassed only by the Belarusian ruble among more than 170 currencies tracked by Bloomberg.

Free Float

Policy makers are struggling to contain the country’s worst currency crisis since 1998 as the ruble lost almost 50 percent against the dollar in the past 12 months. The central bank shifted to a free-floating exchange rate ahead of schedule in November and is overseeing a 1 trillion-ruble ($15 billion) bank recapitalization plan.

The ruble weakened 41 percent against the dollar last year. On Dec. 16, the central bank took its biggest step to shore up the currency, raising its key interest rate to 17 percent from 10.5 percent in a surprise announcement just before 1 a.m. in Moscow that day.

With an earlier rate increase, a smaller step would have been sufficient, Economy Minister Alexei Ulyukayev said in an interview with Bloomberg TV yesterday.

“The earlier you do it, the smaller the jump, so it could be 13 percent or 14 percent or something like that,” he said. Still, the ruble now has “more chances for appreciation than for depreciation.”

GDP Forecast

Last month’s rate move was the largest single increase since 1998, when Russian rates soared past 100 percent and the government defaulted on debt. The ruble plummeted to 80 rubles per dollar the next day.

With oil near $45 a barrel, gross domestic product will probably shrink 4 percent to 5 percent this year, Ulyukayev said. The central bank last month forecast a decline of 4.5 percent to 4.7 percent with crude at $60.

The ruble’s weakness helps offset the budget revenue lost because of the decline in energy prices, Ulyukayev said.

“We are losing something with the oil prices, but we are winning with the devaluation, in terms of the budget,” Ulyukayev said. “We think we have possibilities in 2016 and 2017 to have a positive real GDP performance.”

‘Policy Continuity’

The central bank will maintain its strategic and tactical goals in monetary policy after Tulin replaces Yudaeva, Nabiullina said in an e-mailed statement yesterday. He will take over in the “coming days,” she said.

The central bank’s “comments suggest a high degree of policy continuity,” Anatoliy Shal, JPMorgan Chase & Co.’s chief Russia economist in Moscow, said in an e-mailed report. “Tulin has wide experience in bank supervision and monetary policy.”

Tulin, 58, joined the Soviet central bank in 1978 after graduating from the Moscow Financial Institute. He later served as the Russian monetary authority’s deputy chairman in the middle of the 1990s and in 2004-2006. Nabiullina described him as a “very responsible” official, who has a “deep understanding” of monetary policy.

“We view Tulin’s appointment positively,” Natalia Orlova, chief economist at Alfa Bank in Moscow, said by e-mail today. “Reshuffling responsibilities within the CBR team after a round of ruble instability suggests that the CBR will now try to manage market expectations instead of denying their importance.”

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