Russian central bank rebuffs Putin, says rates will fall with inflation

Putin, who returned to the Kremlin last May for a third presidential term and has been Russia's most powerful politician since the turn of the millennium, has long been used to getting his way.

But, despite adding his voice to a crescendo of calls from top officials and business leaders for interest rate cuts to boost a flagging economy, Putin drew a calm rebuttal from Sergei Ignatyev, the veteran chairman of the Bank of Russia.

Speaking at a Kremlin meeting broadcast live on state TV, Ignatyev said interest rates should follow inflation down from over 6% to expected levels of 4% or below “in the next few years”.

“Interest rates will fall, perhaps not straight away, perhaps with a delay. But, as inflation falls, interest rates will fall,” the 65-year-old central banker said.

Ignatyev, who retires in June after 11 years at the helm, said the government would have to uphold fiscal discipline to open the way for future interest rate cuts.

Putin has yet to select Ignatyev's successor — he is expected to do so in March - and the jury is out on whether he will pick a hawkish guardian of inflation-fighting or a more dovish advocate of monetary stimulus for Russia's $1.9 trillion economy.

“This political pressure is reaching its peak right now, with the most powerful person in the country,”

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