Opinion

Accessories and monetary policy signals

Manasi Phadke | Updated on: Mar 02, 2022
Russia’s central bank governor Elvira Nabiullina has been known for signalling monetary policy stance through innovative designs in her brooches

Russia’s central bank governor Elvira Nabiullina has been known for signalling monetary policy stance through innovative designs in her brooches | Photo Credit: Maxim Shemetov

Russia’s central bank chief uses brooches to convey policy intention

The Central Bank of Russia is in a tizzy — after all, it is not every day that you get exchange rates crashing magnificently because your country decided to launch an unwarranted invasion on the neighbouring country. This week, following economic sanctions from the Europeans, investors have been ditching the currency, prompting the exchange rate to go crashing to a new low of 120 roubles to the US dollar.

The central bank has put in a slew of measures to steady up the currency. The immediate response has been to increase the interest rates from 9.5 per cent to an unprecedented 20 per cent. The central bank has asked exporting firms to sell up to 80 per cent of their foreign currency earnings. It has itself also been selling dollars; since February 24, the central bank has sold around $1 billion of forex reserves, thereby signalling its intent to steady up the rouble.

Central banking ‘signals’ are the big thing in policy. Economists all over the globe go gaga over deciphering such signals — these come in guidance notes and speeches of central bankers, and even the commas and full stops in the documents are perceived as ‘strategic’ punctuations. However, the celebrated head of the Russian central bank Elvira Nabiullina has been known for signalling the monetary policy stance rather fashionably — through innovative designs in her brooches!

Russian media believes that Elvira uses brooches at public events to ‘signal’ the state of the Russian economy to the markets. Elvira herself acknowledges that the accessories have become her alternative language, and they give the markets a chance to decipher the policy stance of the Russian central bank. She has also said that usage of the brooch gives a broad signal to the markets, while also maintaining a certain amount of mystery about the actual actions of the central bank.

Some brooch history

Here’s a quick peek into the brooch history. In March 2020, Elvira chose to wear a brooch with the design of a traditional Russian toy-doll on it. The toy is designed in such a way that if pushed back, it pops right back up. The Nevalyashka doll was meant to signal that the pandemic-hit country would come right back on its usual growth trajectory.

In May 2020, the government was hoping that people would stay at home, a sentiment echoed by the central banker sporting a brooch in the form of a house. In June 2020, the Russian central bank did what all bankers across the globe were doing — it slashed interest rates, ushering an era of soft monetary stance. Elvira’s preferred accessory showed a dove.

The August monetary policy review saw Elvira wearing a brooch with a pause sign — the central bank chose status quo on interest rates. In October 2020, her brooch ominously showed a ‘wave’. In December 2020, she sported on her brooch a bright red bullfinch, a hardy winter bird known for resilience to long frosty winters. Since March 2021, Elvira has worn brooches showing clouds (problems), spiral patterns (inflation) and a hawk and a jaguar (predatory, aggressive monetary policy stance), reinforcing the imagery with actual rate hikes.

Fast forward to February 2022. Even as the Ukraine crisis was unfolding and the world was trying to decipher Russia’s strategy with bated breath, Elvira wore a brooch showing an image of scales. While it left markets puzzled, many of the central bankers across the globe may have sympathised. After all, it is her unenviable job to bring a sense of balance to an economy that has tipped all scales politically, a story well-known to cause a general sense of Covid-type shivers in the circle of central bankers.

One wonders what would happen, if more central bankers across the globe were to turn more fashionable and give policy signals through accessories. Jerome Powell would undoubtedly sport a serpent with a tapering tail about to throw a tantrum. Christine Lagarde would have a lot of choices. She could sport a gas pipeline. Optionally, just a refrigerator would do, indicating a freeze on Putin’s assets. Optionally, she might choose to simply not wear a brooch, giving a signal of doing zero transactions with the Russian central bank. “If they wear a brooch, we will not. “

Shaktikanta ji has his own set of troubles. He may decide to sport an inverted V on his jacket, indicating his hope that inflation has peaked in India. God help us if markets interpret it to be GDP growth, nah, maybe the inverted V is a bit dicey. A tulip on the jacket will do too. Most suitable would be ditching the brooch altogether and simply sporting a spot of oil on the jacket.

The writer is a brave economist trying to laugh against the odds

Published on March 02, 2022
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