* Nabiullina pursues predecessor's anti-inflation agenda
* Establishes credentials as verbally adroit technocrat
* Critics say Nabiullina remains Putin loyalist
* Monetary policy in hands of two women, making history
By Lidia Kelly
MOSCOW, Oct 8 When at a recent Russian
government meeting a minister abruptly proposed an inflationary
change to the budget, the television cameras switched to the new
central bank head, her face tightening.
The sharp reaction of the normally poised Elvira Nabiullina
shows there is still a lot to learn about the 49-year-old
economist, whom many had expected to succumb to pressure to
loosen monetary policy and aid stalling growth.
Instead, the protege of President Vladimir Putin has in her
first three months in office sought to establish herself as a
credible inflation fighter - a more technocratic reincarnation
of her bluff predecessor Sergei Ignatyev.
"Many are surprised by how independent she seems to be,"
said one government official who requested anonymity. "But some
are saying that, perhaps, she is doing exactly what the Kremlin
wants her to do."
The Russian economy, the world's eighth largest, has slowed,
forcing the government to slash its 2013 growth forecast to 1.8
Yet expectations have been dashed that Nabiullina would bow
to calls from powerful industrialists and the pro-growth Economy
Ministry to enact a round of interest rate cuts to revive
Those with inside knowledge are not surprised.
"Easing? Well, no," Finance Minister Anton Siluanov told
Reuters in a recent interview. "Policy will be the same as under
the previous leadership, with of course, some nuances."
Nabiullina even resorted to a threat to tighten monetary
policy to secure a government commitment to cap utility price
hikes, winning a row with Economy Minister Alexei Ulyukayev, a
former central banker passed over for the job she got.
At the most recent central bank policy meeting she sounded
sterner than ever in defending the bank's fight against
inflation, which at 6.1 percent remains above the 5-6 percent
"To support economic growth we need to lower inflation. This
is our main goal," Nabiullina told reporters. "Let me say it
again: monetary stimulus would not be effective in our view."
Such briefings mark a departure for the central bank, which
until a few years ago did not even disclose the dates of its
meetings. Nabiullina's comments show her in tune with the
concerns of ordinary Russians - and Putin voters.
According to surveys by the Levada Center, a respected
opinion research group, at least two-thirds of Russians consider
inflation as the country's most pressing economic problem. The
second worry - poverty - comes a distant second.
TO LISTEN AND TO HEAR
Konstantin Sonin, a professor at the Higher School of
Economics that is headed by Nabiullina's husband Yaroslav
Kuzminov, calls expectations of quick monetary easing
Sonin doubts that there will be much meddling by the Kremlin
in policymaking at the central bank.
"The whole experience of Putin's rule shows that when it
comes to macroeconomic policies he trusts his advisers very
much," he said. "In fact, he has protected them from political
Artyom Konstandyan, chief executive of Promsvyazbank,
acknowledged Nabiullina's independence but had greater
appreciation for her engagement with the financial community.
"Banking has its own specifics that the current chairman
will learn with practice," Konstandyan told Reuters. "But there
is a willingness not only to manage, but to listen and to hear,
and it is greater than in the previous chairman."
Significantly, Ignatyev, who retired after 11 years in the
has been retained by Nabiullina in an advisory role.
The central bank has only limited scope to meaningfully
influence the cost of credit to Russian borrowers, while
overseeing Russia's unruly collection of 1,000 banks poses huge
But, under Nabiullina, it has simplified its interest-rate
toolkit while offering longer-term funds at a narrower premium
in a bid to improve the 'transmission' of its policy via the
flow of affordable credit to the real economy.
The bank's clout is undeniable - it is one of the country's
most respected institutions and holds half a trillion dollars in
reserves, an important buffer to protect Russia's
resource-dependent economy against external shocks.
For Anders Aslund, a senior fellow at the Peterson Institute
for International Economics in Washington, Nabiullina draws her
authority from her ties to Putin and the central bank's own
"The question has been whether the conservative Russian
economic policy establishment could withstand this pressure or
give in or be replaced," Aslund said. "So far, it does hold up."
WOMEN MAKING HISTORY
The fact a woman now chairs Russia's central bank is
noteworthy in itself. And Nabiullina has appointed another,
Ksenia Yudayeva, as a first deputy.
Yudayeva, who until recently was Russia's "sherpa" to the
Group of 20, is regarded as one of the brightest in the country.
At her first press conference alongside Nabiullina, when
asked why those who had expected the central bank to cut rates
might be disappointed, Yudayeva laughed and said: "They had not
listened to me carefully."
Yudayeva, who has a doctorate from the Massachusetts
Institute of Technology, complements the more politically
experienced Nabiullina to create a duo capable of advocating an
independent and professional monetary policy.
"Without a doubt, this is the most qualified, at least in
the academic and technical sense, team in the history of the
Russian central bank," said the HSE's Sonin.