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Putin Makes Aide First Female G8 Central Banker

Wednesday, 13 Mar 2013 | 2:05 AM ET
Elvira Nabiullina, Russia's economy minister
Alexander Zemlianichenko Jr | Bloomberg via Getty
Elvira Nabiullina, Russia's economy minister

President Vladimir Putin on Tuesday chose his chief economic adviser to head Russia's central bank, backing a loyal technocrat seen as more likely to bow to political pressures to ease monetary policy than other potential candidates.

Elvira Nabiullina, a 49-year-old economist and former cabinet minister, emerged as a compromise choice after Putin ruled out picking an insider to replace Sergei Ignatyev, who is standing down in June after 11 years in the job.

Putin blessed Nabiullina's candidacy in a meeting at his residence outside Moscow. In a sign of her lack of experience in monetary policy, Nabiullina immediately asked for Ignatyev - who was present - to stay on as an adviser.

She will join a small female contingent at the top table of global finance,led by International Monetary Fund chief Christine Lagarde and the heads of the central banks of South Africa and Argentina, just in time for Russia to host the Group of 20 summit in St. Petersburg this September.

She was the only contender left standing after a behind-the-scenes battle for control over monetary policy between the Kremlin, concerned by weakening economic growth, and inflation hawks who predominate at the central bank.

Ignatyev's most senior deputy, Alexei Ulyukayev, had long been regarded as his likely successor. His role as the central bank's top policy spokesman may now be at risk.

"The decision represents a move away from the hawkish credentials of Ignatyev," said Timothy Ash, head of emerging markets research at Standard Bank in London.

Putin's choice - who should have no problem getting the approval of Russia's parliament - provoked mixed reactions. Analysts rate Nabiullina as a solid economist but questioned whether her appointment would hit the bank's resolve to fight inflation.

"Nabiullina is a safe pair of hands. She's a very much a part of the liberal democratic establishment in Moscow," said Anders Aslund, a senior follow at the Peterson Institute for International Economics in Washington.

Nabiullina is a protege of German Gref, a former Economy Minister who now heads state-controlled Sberbank. Her husband is the rector of Moscow's Higher School of Economics, a bastion of liberal economics.

But analysts have expressed concerns over Nabiullina's lack of banking or finance experience, as well as the possibility that - by appointing member of his own Kremlin team - Putin may jeopardize the central bank's independence.

"The decision is a blow to hopes for a more independent monetary policy over the coming years," said Neil Shearing, chief emerging markets economist at Capital Economics in London.

Economists expect the central bank to keep interest rates on hold this Friday and in the coming months, after inflation topped 7 percent, but some now factor in a series of quarter-point rate cuts in the second half of the year.

Since it become clear that Nabiullina was the top candidate, Russian bonds have seen a modest sell-off, reflecting concerns that she will be softer on inflation than the present central bank leadership.

"If you focus on her institutional past and positions she's held, there is a risk of a more dovish central bank which may imply a weaker rouble and higher inflation," said Jacob Nell, chief Russia economist at Morgan Stanley.

Growth Concerns

The central bank's refusal to cut interest rates in the face of slowing growth has provoked official criticism, including concerns expressed by Putin that high interest rates are hurting growth.

In televised remarks Andrei Kostin, the head of Russian bank VTB, praised Nabiullina's appointment, while calling the central bank's current monetarist stance "inadequate". He and other bankers have repeatedly criticised the central bank for restricting the flow of credit to the economy.

"Nabiullina will find the right balance because she has been responsible for economic growth and is responsible for financial stability," Kostin said.

Unlike other top officials, Nabiullina has refrained from criticizing the central bank. In recent years she has not commented publicly on monetary policy - making her something of an unknown quantity in her new job.

News of her appointment has nevertheless been praised by some monetary hawks as well as doves.

"A good candidate. I wish her success!" tweeted Alexei Kudrin, a former finance minister who, sources say, still enjoys an effective veto on the central bank nomination.

Nabiullina's appeal to different sides in Russia's policy debate means that,for Putin, she was an ideal compromise candidate.

"She's more of a conciliator than a person who pushes her own will," said Aslund. "Among all the presented candidates she is the one who has the fewest enemies."


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