President of Russia Dmitry Medvedev: I have decided to submit your candidacy for a new term of the Central Bank chairmanship to the State Duma to ensure that all appropriate procedures are completed. Of course all the responsibilities entrusted to you as Chairman of the Central Bank remain entirely yours. In every situation, even in the current difficult situation, the Central Bank is obliged to carry out its major functions and to achieve its main objectives, namely it must ensure the sustainability of our currency, the ruble, and focus on ensuring the smooth functioning of the banking and payment systems, and of course the elaboration and implementation of a consistent monetary policy in our country. Those are big, even massive challenges, macroeconomic challenges, as they say, and they have very specific consequences, namely the availability of loans at affordable rates in our country, the financial well-being of our people and their confidence in the policies of the government and the Central Bank. Altogether, these constitute your concerns, your responsibilities. I would like you to continue to deal with these important matters.
Chairman of The Central Bank Sergei Ignatyev: Thank you.
First and foremost I would like to thank you for the confidence you have shown in me. I will do everything I can to justify it.
As for the current situation, I believe it is stable. Indeed I would say that it is better than anticipated a few months ago. Nevertheless, there are still problems, mainly those caused by the global economic crisis. The major problem, the one of our utmost concern is the increase in overdue debts of industries to the banking sector.
Unfortunately, the situation is complicated. We are monitoring it carefully, and I think it will improve once the measures devised by the Government Cabinet of the Russian Federation and the Central Bank are fully implemented: first, extending state guarantees on loans; second, a new phase of subordinated loans provision; and third might be capitalising companies on federal government bonds. We might need to take this step or we might not – it depends on how things develop. This is not an exhaustive list of measures and we can explore other options of supporting both the banking system and the real sector of the economy. This is the major problem, although we are not neglecting other challenges that we have to face, most importantly inflation.
Inflation rate has been decreasing, thank goodness: there were encouraging signs in April and May looks quite good. I believe that in the coming months inflation will continue to fall to enable the Central Bank to reduce interest rates which will eventually result in lower interest rates on loans extended by the banks to the companies and thus help to remedy the general economic situation.
With regard to the exchange rate everything looks fine. We completed the devaluation in late January and since early February the ruble has appreciated against the dual currency basket by about 10 percent. At some point, we thought that was perhaps too much if we are to maintain the creditworthiness of the real sector in international markets and the domestic market. Nevertheless we adhere to further increase in the exchange rate flexibility intending at some stage to let the ruble float freely and to follow inflation targeting policy, but these are plans for the future. At the moment we’re not going to try to force things.
The Russian ruble is growing stronger. Back in January and February we thought we might have to support the ruble through major exchange market interventions, I mean by selling foreign currency. In the present situation we have to buy foreign currency instead, and the Central Bank is buying foreign currency to prevent ruble overstrengthening. Still, the overall situation in this regard is absolutely sound.
Dmitry Medvedev: But all in all these trends really are divergent in nature. In general I agree with what you’re saying. We do have a stable situation or, as you just said, a better situation than might have been imagined in the light of current trends in the global economy and financial system.
There are some concerns on everyone’s mind, and you mentioned the problem of overdue debts and the measures to counter these problems, including the possibility of issuing state guarantees, federal loans and bonds (although we haven’t come to that yet). At this point there is only one thing I want to instruct you and the Cabinet of the Russian Federation to do: if we choose to implement these measures, if that is what is really required, they should be effected swiftly, because our main problem now is a time lag between approval of a decision and its actual implementation, which affects the economy.
But we will deal with this in due course. Now I’d like to say once again that I wish you every success and hope that the Central Bank will continue to perform all of its basic constitutional functions under your chairmanship.
Sergei Ignatyev: Thank you very much.