Monday, May 27, 2019

Interview With One Of The Sharpest Central Bankers In the World, Russia's Elvira Nabiullina

We've been singing her praises for a few years now. Here's the introduction to a 2018 post:

"Russia’s central bank quietly raised its key interest rate by 0.25 percentage points on Friday"
If you think having Donald Trump question the Fed head for raising rates is playing rough, just imagine working for Vlad Putin as his popularity drops.
Considering the hand she's been dealt, the chief of the Russian central bank, Ms. Nabiullina, should have garnered a couple more Euromoney Central Banker of the Year awards to sit next to the one she received in 2015.

Seriously, since she took over in 2013 oil prices collapsed, then doubled, the annexation of Crimea led to the first set of sanctions, the rouble fell 50%, the U.S. Treasury threatened Russian banks with exclusion from SWIFT, the second set of sanctions on companies and oligarchs led to the retraction of multi-billion dollar credit facilities which had to be replaced internally and a couple other things that I'm having trouble remembering.
And all the while Vladimir is looking over your shoulder.

Anyway, all good mini-rants come to an end, here's the headline story from Sputnik CNBC
(astute reader will note eco-friendly intro recycling)

CNBC Interview with Elvira Nabiullina, Governor, Central Bank of Russia
Below is the transcript of a CNBC interview with the Central Bank of Russia's Governor, Elvira Nabiullina, and CNBC's Geoff Cutmore.
GC: Governor, I wanted to start by getting an updated view from you on how you think the Russian economy is doing right now. It seems like it's been a relatively strong start to the year, are you feeling confident that this resilience will continue through the rest of 2018?

EN: The Russian economy has entered stable, if not considerable rates of growth. The last year showed a growth of 1.5%. Our estimate for 2018 and for 2019 and 2020 thereafter is in the 1.5 – 2% range. Perhaps you recall that we estimated the potential growth rate at this level. The Russian economy has pretty much emerged from recession and has recovered, reaching growth rates close to potential.
It is growing in accordance with our baseline forecast but our President has set us the objective whereby the Russian economy grows at rates above world levels. This means almost 4%. Of course this requires a rise in the potential growth rates. It requires structural reforms, in terms of labour productivity, private investment and then the economy can grow at higher rates than it is now.

GC: The problem is, as you have pointed out over and over again, without serious institutional reform, we're not going to achieve those higher growth rates here. Do you think that there was perhaps a missed opportunity in reappointing many of the same figures to the government that have been in position previously and have not really pursued the kind of structural reform that this economy needs?

EN: I think that structural reforms in Russia are possible, not to mention that they are essential. And it is expected that the government will propose specific measures by the autumn, by October, so as to achieve higher growth rates in economic growth and to increase prosperity. But I would like to stress that it is very important, including from the standpoint of the Central Bank, that structural reforms of this kind should go together with macroeconomic stability.
In other words, a rise in economic growth rates should not be to the detriment or at the expense of…on the basis of macro-stability, low inflation, a well-balanced budget deficit. And I think that this is within the abilities of the new government. Naturally, the Central Bank will perform its part of the work in supporting macroeconomic stability.

GC: So, you are comfortable, though, with the idea that you sacrifice higher growth for stability. So, stability is something you would prefer at the expense of slower growth?

EN: I think this is the wrong impression of macro-stability and high, sustainable growth rates. I believe that high, sustainable growth rates can only be possible on the basis of macro-stability…because, if cheap money, as some have suggested, is used in an attempt to stimulate higher growth rates at the same time as the economy is already growing close to potential rates, this could only lead to an overheating, to a short-lived spike in economic growth and then it could fall back once more, and we have seen this with certain countries so, therefore, I believe, the Central Bank believes that it is high and stable economic growth rates may be on the basis of a combination of macroeconomic stability and structural reforms....