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Putin tips central bank chief Nabiullina for third term to ensure economic stability

Randy Mancini 7 Mar 18
FILE PHOTO: Russian Central Bank Governor Nabiullina speaks during an interview in Moscow
FILE PHOTO: Elvira Nabiullina, Governor of Russia's Central Bank, speaks during an interview in Moscow, Russia, June 27, 2019. REUTERS/Evgenia Novozhenina//File Photo

March 18, 2022

(Reuters) -Russian President Vladimir Putin has proposed nominating central bank Governor Elvira Nabiullina for a third term in a bid to ensure macroeconomic stability, spokesman Dmitry Peskov said.

A surprise appointment in 2013, 58-year-old Nabiullina, an economist and former advisor to Putin, is the first woman to chair one of Russia’s most respected institutions.

Her current term ends in June and on Friday Putin asked the Lower House of Parliament, or Duma, to consider his re-appointment proposal on March 21.

“Now, when the central bank is facing a growing responsibility to maintain macroeconomic stability, the president regularly speaks to Nabiullina,” Peskov told reporters on a daily call.

Nabiullina is a committed inflation fighter, resisting calls from powerful industrialists and the Economy Ministry for interest rate cuts to revive growth.

The bank held its key interest rate at 20% on Friday after a sharp emergency hike in late February. Nabiullina is due give a monetary policy statement at 1400 GMT, without taking questions.

“Reappointment removes unnecessary questions from different ‘groups of influence’,” said Dmitry Polevoy, investment director at Locko Invest.

“Obviously, in the current environment, the economy would need a stimulating monetary policy which will further impact the trajectory of the key rate. But it seems that there will be no radical change in the approach given Nabiullina’s re-appointment.”

The central bank raised its key rate from 9.5% on Feb. 28 as the rouble crashed to record lows and people rushed to withdraw money from banks following an unprecedented barrage of Western sanctions against Russia for what it calls a “special military operation” in Ukraine.

“The Russian economy is entering a large-scale structural transformation phase, which will be accompanied by a temporary but inevitable period of increased inflation,” the central bank said on Friday.

An independent survey of analysts requested by the central bank this month forecast inflation of 20% and an 8% economic contraction this year while predicting the key interest rate would average 18.9%.

The central bank did not provide inflation and economic growth forecasts on Friday, only saying that gross domestic product would reduce over the coming quarters and that it expects annual inflation to return to its 4% target in 2024.

Before the wider military conflict between Russia and Ukraine broke out in late February, the central bank had revised its year-end inflation forecast to 5.0-6.0%, giving up earlier hopes that it would ease to 4.0-4.5%.

Back then, it expected inflation to reach its 4% target in mid-2023.

(Reporting by Reuters; editing by Tomasz Janowski, Kirsten Donovan)