New Russian central bank chief pledges changes

New Russian central bank chief pledges changes
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Russia’s next central bank chief, Elvira Nabiullina, is pledging changes to the way the bank works in order to boost the flow of credit via retail bank lending to the country’s real economy.

The 49-year-old economist – who was hand-picked for the role by President Vladimir Putin last month – appeared before a parliamentary confirmation hearing on Tuesday.

She said: “The banking system, despite the problems that exist, has nonetheless made major progress in the past few years. But the remainder of the financial system is still weak. That’s one reason why companies are fleeing Russian jurisdiction, the ‘offshorisation’ of our economy.”

Capital outflow has vastly accelerated in recent months. In the first quarter of 2013 the central bank estimates it was the equivalent of $25.8 billion (19.8 billion euros).

Net capital outflow in the fourth quarter of last year was $7.9 billion. For all of 2012, the country’s net capital outflow was $54.1 billion, according to the central bank’s data.

Nabiullina, who was Russia’s economy minister from 2007 to 2012, rejected calls for a devaluation of the rouble to boost competitiveness following similar moves by major economies and said her aim is to promote economic growth while gradually reducing inflation.

Economists expect the central bank under its new boss to cut interest rates in response to weakening growth.

Nabiullina supported the central bank’s medium-term goal of reducing inflation to between three and four percent from more than seven percent now, saying that was vital to promote investment-led growth.

But she also left the door open to cuts in rates saying: “Even though current central bank rates are below inflation, there is still room for manoeuvre.”

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