News / Europe

For Putin's Central Bank Pick, Much to Prove

Russian presidential aide Elvira Nabiullina, right, at a meeting on fuel and energy, Novo-Ogaryovo residence, near Moscow, Feb. 13, 2013.
Russian presidential aide Elvira Nabiullina, right, at a meeting on fuel and energy, Novo-Ogaryovo residence, near Moscow, Feb. 13, 2013.
TEXT SIZE - +
Reuters
— Elvira Nabiullina has the confidence and credentials as an economist to resist Kremlin appeals for looser monetary policy once she moves from Vladimir Putin's office to head the Russian central bank.
 
But for some, the president's choice — announced on Tuesday at the expense of frontrunners within the bank's existing management — signals the decline of a liberal economic policy elite that has dominated strategy since Putin rose to power 13 years ago and shows central bank independence only goes so far.
 
Either way, the 49-year-old will find herself, once she succeeds the widely respected Sergei Ignatyev in June, at the heart of a tussle between Putin's desire for economic growth and those who fear inflation could undermine investor confidence.
 
Admirers describe Nabiullina as an accomplished academic economist and experienced civil servant who has the self-assurance to speak truth to power — in private at least if not in public: "She is one of the people who isn't afraid to tell Putin what he doesn't want to hear," said Yevgeniya Albats, editor of opposition-minded newspaper New Times.
 
"There are very few people like that in Putin's circle," Albats told Ekho Moskvy radio.
 
Yet others say her background in the Economy Ministry — long the government's "department for growth" — equips Nabiullina poorly for the task of steadying Russia's oil-dependent economy and keeping the state-dominated banking system in line.
 
"It is hard to see what credentials Elvira Nabiullina ... has in order to run the Central Bank of Russia," commented Renaissance Capital economist Ivan Tchakarov.
 
In a sign that she is aware of starting in the role as an outsider, Nabiullina asked for Ignatyev to stay on as an adviser and Putin assented — an exchange captured by television cameras covering the president's announcement of the new bank governor.
 
But Vladimir Tikhomirov, chief economist at Otkritie Capital in Moscow, did not see the presence of Ignatyev after his retirement as an indication of continued central bank autonomy: "The Central Bank of Russia under her leadership would be seen by many as a department of the Kremlin administration and not as an independent voice," he said.
 
Big shoes
 
During Ignatyev's 11-year tenure, the central bank has quietly established itself as one of Russia's most respected economic institutions.
 
Investors and economists are especially impressed by the steps that Ignatyev has taken in recent years to embrace inflation targeting — a monetary policy framework, now orthodox in western countries, whereby central banks use the goal of low inflation as their central benchmark.
 
Nabiullina's appointment comes at a sensitive time, when the new policy regime, a work in progress that will be fully adopted by 2015, is facing its first real test.
 
Despite a barrage of criticism, including from within the government, the central bank has steadfastly refused to cut interest rates as long as inflation — presently running above 7 percent — remains well above its target ceiling.
 
Few expect to see any imminent change of heart. Most forecasters are sticking to their view that there will be no change in rates at the central bank policy meeting on Friday.
 
But there are rising expectations of rate cuts in the second half of the year, with many analysts now predicting that they will be larger, and perhaps sooner, than previously anticipated.
 
The danger for those who see benefits in its autonomy is that if the central bank eases up policy too readily, it will appear to be responding to political pressure from the Kremlin.
 
"The central bank has taken great strides towards credible inflation targeting," said Christopher Granville, managing director of Trusted Sources, an emerging market research firm in London.
 
"It's being tested by ... the economic slowdown, and obviously the political leadership is looking for relief," he said. "The question is whether they will jeopardize the credibility of the new framework."
 
Russia's economy grew by 3.4 percent last year, and its nominal gross domestic product of $2 trillion is on track to overtake the recession-bound economies of Italy, Britain and France in the coming years.
 
But that is not enough for Putin, whose first two terms as president saw growth averaging double that pace. The 60-year-old Kremlin leader, elected for a third term a year ago, needs faster growth to placate an increasingly restive middle class.
 
Fundamental challenge
 
A further challenge facing Nabiullina will be overseeing and implementing the legal and institutional changes that are now needed to cement inflation-targeting.
 
While the central bank favors a clear mandate that focuses on the primary goal of fighting inflation, critics within the political establishment are pressing for a broader, and fuzzier, one that also emphasizes economic growth.
 
Since news of Putin's backing for his aide, the ruble has weakened slightly, while yields on long-term bonds — a measure of inflation expectations — have risen.
 
But for now, financial markets and most analysts are giving Nabiullina the benefit of the doubt. At least in terms of its formal strategy, the central bank priorities established by Ignatyev seem unlikely to change.
 
Nabiullina is expected to rely heavily on the advice of Ignatyev's existing team of deputies. One key leader responsible for monetary policy, Alexei Ulyukayev, has made clear that he intends to stay on.
 
"As head of the central bank," said Granville at Trusted Sources. "She'll tend to take the central bank's view, which speaks for reasonable continuity."

You May Like

Multimedia Relatives of South Korean Ferry Victims Fire at Authorities

46 people are confirmed dead, but some 250 remain trapped inside sunken ferry More

War Legacy Haunts Vietnam, US Relations

$84 million project aims to clean up soil contaminated by Agent Orange More

Wikipedia Proves Useful for Tracking Flu

Technique gave better results than Center for Disease Control (CDC) and Google’s Flu Trends More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Ukraine, Russia, United in Faith, Divided in Politicsi
X
Michael Eckels
April 19, 2014
There is a strong historical religious connection between Russia and Ukraine. But what role is religion playing in the current conflict? In the run-up to Easter, Michael Eckels in Moscow reports for VOA.
Video

Video Ukraine, Russia, United in Faith, Divided in Politics

There is a strong historical religious connection between Russia and Ukraine. But what role is religion playing in the current conflict? In the run-up to Easter, Michael Eckels in Moscow reports for VOA.
Video

Video Face of American Farmer is Changing

The average American farmer is now 58 years old, and farmers 65 and older are the fastest growing segment of the population. It’s a troubling trend signaling big changes ahead for American agriculture as aging farmers retire. Reporter Mike Osborne says a new report from the U.S. Census Bureau is suggesting what some of those changes might look like... and why they might not be so troubling.
Video

Video Donetsk Governor: Ukraine Military Assault 'Delicate But Necessary'

Around a dozen state buildings in eastern Ukraine remain in the hands of pro-Russian protesters who are demanding a referendum on self-rule. The governor of the whole Donetsk region is among those forced out by the protesters. He spoke to VOA's Henry Ridgwell from his temporary new office in Donetsk city.
Video

Video Drones May Soon Send Data From High Seas

Drones are usually associated with unmanned flying vehicles, but autonomous watercraft are also becoming useful tools for jobs ranging from scientific exploration to law enforcement to searching for a missing airliner in the Indian Ocean. VOA’s George Putic reports on sea-faring drones.
Video

Video New Earth-Size Planet Found

Not too big, not too small. Not too hot, not too cold. A newly discovered planet looks just right for life as we know it, according to an international group of astronomers. VOA’s Steve Baragona has more.
Video

Video Copts in Diaspora Worry About Future in Egypt

Around 10 percent of Egypt’s population belong to the Coptic faith, making them the largest Christian minority in the Middle East. But they have become targets of violence since the revolution three years ago. With elections scheduled for May and the struggle between the Egyptian military and Islamists continuing, many Copts abroad are deeply worried about the future of their ancient church. VOA religion correspondent Jerome Socolovsky visited a Coptic church outside Washington DC.
Video

Video Critics Say Venezuelan Protests Test Limits of Military's Support

During the two months of deadly anti-government protests that have rocked the oil-rich nation of Venezuela, President Nicolas Maduro has accused the opposition of trying to initiate a coup. Though a small number of military officers have been arrested for allegedly plotting against the government, VOA’s Brian Padden reports the leadership of the armed forces continues to support the president, at least for now.
Video

Video More Millenials Unplug to Embrace Board Games

A big new trend in the U.S. toy industry has more consumers switching off their high-tech gadgets to play with classic toys, like board games. This is especially true among the so-called millenial generation - those born in the 1980's and 90's. Elizabeth Lee has more from an unusual café in Los Angeles, where the new trend is popular and business is booming.
Video

Video Google Buys Drone Company

In its latest purchase of high-tech companies, Google has acquired a manufacturer of solar-powered drones that can stay in the air almost indefinitely, relaying broadband Internet connection to remote areas. It is seen as yet another step in the U.S. based Web giant’s bid to bring Internet to the whole world. VOA’s George Putic reports.
AppleAndroid