Putin taps close ally as Russia central bank chief

Russian President Vladimir Putin said Tuesday he intends to nominate Kremlin economic adviser and his close ally Elvira Nabiullina to parliament as Russia's next central bank chief. Nabiullina, who served as economic development minister in the last government, would replace the widely-trusted Sergei Ignatyev who is retiring after heading the Bank Rossii (Bank of Russia) since 2002. "I intend to propose the candidature of Elvira Nabiullina for the post of chairman of the Russian central bank," Putin said in televised remarks. "The years of the crisis, most difficult and dangerous for our economy, passed with relatively minimal losses, including due to your input," Putin told Ignatyev as he met with both the outgoing chief and Nabiullina. Economists had been nervous about Putin's eagerly-anticipated decision for one of the top economic posts in Russia, at a time when the country is seeking to balance declining growth with resurgent inflation. While a trusted advisor of Putin, Nabiullina's appointment may reassure some who were fearing he could make a far wilder choice like his much more radical economic aide Sergei Glazyev or banker Andrei Kostin. But her reputation as a close ally of the president may trigger fears that Nabiullina will be ready to heat up the economy by trimming rates and stoke up inflation expectations. "Nabiullina is considered too close to Putin and, thus, definitely open to political pressure," said Ivan Tchakarov, chief economist at Renaissance Capital "When she was economy minister, she always supported a macroeconomic policy that was at odds with the more conservative and prudent approach pursued by the finance ministry." "Nabiullina will mean higher inflationary expectations and weaker currency. This will still be a blow to central banks perceived independence," he said in emailed comments. But Nabiullina, 49, said she would like Ignatyev to stay on as her advisor if she is formally appointed by the Russian parliament, as required. Ignatyev's four-year tenure expires on June 23. If confirmed, Nabiullina will become one of the most prominent female figures in Russian public life and one of few officials of Muslim origin to hold a major federal post. A native of the Muslim region of Bashkortostan, soft-spoken Nabiullina worked in the economy ministry in the 1990s. After a brief stint in the commercial sector, she went back to the government with Putin's ascent to the Kremlin in 2000. She served as economy minister when Putin became prime minister in 2008, and shifted to the Kremlin together with many other ministers as he began his third presidential term last year. Her ministry frequently clashed with fiscal hawks of the finance ministry led by Alexei Kudrin, especially during the financial crisis. Her imminent appointment comes as the Bank of Russia is facing key policy choices as it tries to keep a lid on resurgent inflation without harming economic growth. The bank’s relatively hawkish recent stance has frustrated some of Putin’s allies who want looser monetary policy. The Bank of Russia won respect during the 2008-2009 financial crisis with well-calculated injections of liquidity into the economy and finely-judged currency interventions to support the ruble that saved Russia from an even deeper crisis. Ignatyev, 65, is a dignified economist respected by markets who turned the bank’s policy priority towards keeping inflation in check at a time of high oil prices. Speaking last week, Putin said the new chief would be "an unexpected figure". Nabiullina's name had not come up as a rumoured possibility until Monday; other candidates included Ignatyev's deputy Alexei Ulyukayev, Alexei Kudrin, and VTB state bank chief Andrei Kostin. Economists believe Nabiullina may be more inclined to cut Russia's main refinancing rate which currently stands at 8.25 percent. The central bank has until now resisted pressure to begin a cutting cycle to support lagging