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New Russian Central Bank Chief Nabiullina Is No Radical

New Russian Central Bank chief Elvira Nabiullina’s monetary shifts are likely to be incremental.

As Russia’s minister of economy from 2007 to 2012, Elvira Nabiullina won a reputation as a low-key advocate for expansionist economic policy. She would face off behind the scenes with Alexei Kudrin, the long-time finance minister and apostle of fiscal rectitude, analysts say. “Nabiullina would always argue that it’s a good thing to run some budget deficit, that it’s good to have a weaker ruble because it helps Russia export other goods besides oil and gas,” says Ivan Tchakarov, chief economist at Renaissance Capital in Moscow. “She didn’t shout that position, but she supported it.”

Nabiullina, 49, will have a much more powerful platform for her dovish philosophy starting in June: Last week president Vladimir Putin tapped her as his nominee for chairman of the Central Bank of the Russian Federation (CBR). She will succeed another heavyweight tight-money advocate, Sergei Ignatiev, who is stepping down after a largely successful 12-year tenure.

Putin’s choice for Russia’s next central banker was, by his own description, a surprise. The favorite to succeed Ignatiev was his own hawkish deputy for monetary policy, Alexei Ulyukayev. The change in course may not be a bad thing, though, Moscow economists say. Russian economic growth, which has held steadily at around 4 percent annually since 2010, dwindled to 2.4 percent year-on-year in December and 1.6 percent in January. Oil prices have plateaued and a consumer spending boom lost steam thanks partly to the CBR’s own prudent new restrictions on credit. Inflation, though edging up, remains at a historically mild 7 percent annually.

Against that background, the Ignatiev team’s insistence on holding the key refinancing rate stable at 8.25 percent strikes many as overly cautious. “A cut in rates could be useful without excessive risk,” says Alexei Devyatov, chief economist at Uralsib Bank in Moscow.

Nabiullina’s monetary shifts are likely to be incremental, not radical. She is firmly anchored in the Russian establishment’s liberal wing. She was tapped as economics minister by predecessor German Gref, a free-market policy stalwart who left the ministry to head state banking colossus Sberbank. Nabiullina’s husband, Yaroslav Kuzminov, is rector of the Higher Economic School, a bastion of reformist thinking in Moscow.

The central bank designate is also known for her collegial diplomacy. She left it to deputies at the economics ministry to tangle with Kudrin publicy, preferring advocacy behind closed doors herself. A more serious drawback is that she brings no banking experience, or any private sector experience, at a time when the CBR is set to greatly expand its mandate. The bank is set to morph into a “mega-regulator” starting next year by absorbing the Federal Financial Markets Service and bodies that oversee insurance.

Born the daughter of a driver and a factory worker in the industrial city of Ufa, Nabiullina studied economics at Moscow State University during the perestroika era. Since 1995 she has shuttled between the economics ministry and presidential advisory posts.

Nabiullina did get one important vote of confidence, though, from her old antagonist Kudrin. “This is a good candidate. I wish her success,” the ex-lion of Russian finance fired off on Twitter soon after the nomination.

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