Bloomberg News

Nabiullina Says 3%-4% Inflation Key Goal for Bank Rossii

April 09, 2013

Reining in consumer-price growth should remain the Russian central bank’s most important goal as it will help stimulate investment, said Elvira Nabiullina, President Vladimir Putin’s candidate to head the regulator.

“Low inflation is a necessary condition to protect deposits and the motivation to invest in projects with long break-even periods,” Nabiullina, Putin’s aide and a former economy minister, told lawmakers in Moscow today. “For that reason, the gradual reduction of inflation to 3 percent to 4 percent should be the main task of monetary policy.”

Russia, the largest emerging-market economy to raise interest rates last year, took a first step toward easing borrowing costs by reducing some lesser-used interest rates this month. The decision, two months before Chairman Sergey Ignatiev’s final term ends in June, followed calls from the government to do more to stimulate the economy even as inflation remains more than a percentage point above the 6 percent top end of the regulator’s target range.

Keeping the pace of price growth between 5 percent and 6 percent this year and at 4 percent to 5 percent in the next two years is a reasonable goal, according to Nabiullina. Bank Rossii shouldn’t try to cut inflation faster because “it means putting economic growth at risk,” she said.

The ruble gained 0.3 percent to 31.12 per dollar by 3 p.m. in Moscow, its strongest in a week.

Russia’s economy grew 2.1 percent in the fourth quarter from a year earlier, the slowest pace since a contraction in 2009. Economy Minister Andrei Belousov said the pace of growth for 2013 was unlikely to exceed 3.2 percent.

Maneuvering Room

Russia has “room to maneuver” in terms of easing rates, with the main short-term repurchase rates at 5.5 percent, whereas many other countries have expended all room for cuts, Nabiullina said. Still, that would require slowing growth, higher unemployment and should be made based on a full analysis of the situation, she said.

The comments echo remarks by Ignatiev, 65, whom Nabiullina asked to stay on at the bank as an adviser. He told reporters last week that the central bank considers a number of macroeconomic indicators as well as the exchange rate and government policy when deciding on rates.

Russia should continue moving toward a flexible exchange rate, which Nabiullina said has benefited business more than “artificial steps” to weaken the ruble. Bank Rossii has gradually widened the range in which the currency trades against a basket of dollars and euros as it moves toward inflation targeting.

Non-Monetary Factors

She also cautioned that the central bank, while focused on inflation, can’t control it fully because of factors including prices set by the government for natural monopolies. Non- monetary factors may account for as much as half of inflation in Russia, she said.

“I’m far from the position that inflation can be driven down exclusively through monetary methods,” she said, reiterating that the central bank and the government needed to coordinate policy for the best outcomes in terms of growth and inflation.

Alexander Zhukov, first deputy chairman of the lower house of parliament, said Nabiullina’s time as economy minister had won her respect abroad as well as contacts with bankers, which will help her in the new role.

He said the ruling United Russia party, which together with allies controls more than half the votes in the State Duma, would back her at today’s confirmation vote at 5 p.m. in Moscow.

To contact the reporters on this story: Scott Rose in Moscow at; Olga Tanas in Moscow at

To contact the editor responsible for this story: Balazs Penz at

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