Putin Names Aide Nabiullina to Head Russian Central BankScott Rose and Stepan Kravchenko
Elvira Nabiullina, a Kremlin aide and former economy minister, was nominated by President Vladimir Putin to head the central bank, a pick that may tip the balance in favor of monetary policy to promote growth.
Speaking at his residence outside Moscow today, Putin told Nabiullina and Chairman Sergey Ignatiev that he’d submit her nomination to lawmakers. That would make Nabiullina the first woman to head a Group of Eight monetary authority.
Putin, who’s undertaking the biggest-ever expansion of the central bank’s remit to create a U.K.-style mega-regulator, is handing Nabiullina the stewardship of a $2 trillion economy growing at the weakest pace since a 2009 contraction. As the first new chairman in more than a decade, Nabiullina, 49, will need to navigate a clash between the government and the central bank that’s been raging over economic priorities.
“This is positive for economic growth and for building-up the mega-regulator, while it might be negative for inflation targeting as a policy priority,” said Artem Arkhipov, chief economist for Russia at ZAO UniCredit Bank. “It also seems to be mixed for the ruble, as potential pressure from rates might be mitigated by the better fundamentals.”
The ruble pared gains against the dollar, trading 0.1 percent stronger at 30.7023 as of 8:29 p.m. in Moscow.
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 Finance Minister Anton Siluanov and First Deputy Prime Minister Igor Shuvalov. The regulator’s reluctance to cut interest rates has sparked a “huge argument” with the government, Shuvalov said in a Jan. 18 interview.
Nabiullina served as economy minister from 2007 to 2012, leaving to join Putin in the Kremlin after his election to a third term in May.
Putin’s pick must win approval from a majority in the lower house of parliament. Nabiullina thanked Putin at the meeting and said she would like Ignatiev to join her as an adviser if lawmakers approve her nomination. Putin agreed to the proposal.
Ignatiev, 65, must retire June 23 when his third and final term ends, the Kremlin said in a statement after the announcement.
“I want to thank you for the trust you’re placing in me with this nomination, understanding how responsible, difficult, and professional this work is,” Nabiullina said at the meeting.
Nabiullina’s nomination comes at a time of transition at the top of G-8 central banks. Those of Japan, the U.K. and Canada will shortly change hands, while Federal Reserve Chairman Ben S. Bernanke’s second term ends in January and former colleagues say it isn’t likely he’ll want to stay.
Hungarian Prime Minister Viktor Orban’s nomination of his former economy minister, Gyorgy Matolcsy, to lead the country’s central bank has pushed the forint to a nine-month low on concern over the direction of monetary policy.
“This is probably going to reinforce expectations of a more dovish policy bias, which is positive for local bond exposure,” Benoit Anne, London-based head of emerging-market strategy at Societe Generale SA, said by e-mail. It may “undermine the ruble, at least in the near term, as lower interest rates decrease the carry trade appeal.”
Putin stoked speculation over the nominee last week, telling reporters March 7 that his pick would be “unexpected” and “you’ll like it.” The comments, to a female reporter, were on the eve of International Woman’s Day.
Nabiullina would become one of only a few women who dictate interest rates. Females head the central banks of Argentina, South Africa and Malaysia.
If approved, Nabiullina will also need to oversee a planned merger of the Federal Financial Markets Service into the central bank, as well as the implementation of stricter capital requirements for banks under Basel II and Basel III.
Putin selected Ignatiev, ranked last year as Europe’s best central banker by Global Finance Magazine, to take over Bank Rossii in 2002 as inflation was running at 17 percent. In his 11 years at the regulator, the bank has moved from exchange-rate targeting to focus on price growth and plans to start formal inflation targeting from 2015.
Central bank First Deputy Chairman Alexei Ulyukayev, the architect of Ignatiev’s monetary policy, was seen as the most likely pick, according to nine of 15 economists polled by Bloomberg before Putin’s comments last week. Former Finance Minister Alexei Kudrin was ranked as the next most likely, with three votes.
Kudrin, who often clashed with the more growth-oriented Nabiullina over budget spending, congratulated her and said on his Twitter Inc. account that she was a “good candidate” to head the regulator. Kudrin has said he was offered the post and declined. Ulyukayev said today he hoped for continuity in monetary policy, state-run news service RIA Novosti reported.
While Nabiullina is independent from Russia’s billionaires and factions in the legislature, she is “very aligned” with Putin, said Tim McCarthy, head of asset management at Valartis Bank in Geneva, which has over $1 billion invested in emerging markets.
“Putin has been pressing for easier monetary policy,” he said by e-mail. “Nabiullina may make moves in that direction. Frankly, I think easier monetary policy in Russia is necessary.”
Growth slowed to 1.6 percent from a year earlier in January as industrial production contracted for the first time in more than three years. Economists are cutting their forecasts for Russia this year as Europe’s recession saps demand for commodity exports and inflation hurts household spending.