* Russia central bank head sees rouble free float in 2 years
* Ignatyev expected to be re-appointed this week
* World Bank cuts Russian forecast for 2009
(Adds analyst quote, World Bank report, background)
By Dmitry Sergeyev and Gleb Bryanski
MOSCOW, June 22 (Reuters) - Russia may float the rouble in two years but should continue currency market interventions during the transition period, the central bank head said on Monday, outlining his policy vision for the next term.
Sergei Ignatyev, who steered the central bank since 2002, overseeing accumulation of the world's third largest foreign currency reserves and managing both appreciation and depreciation of the rouble, is expected to be re-appointed for a third term on Wednesday.
A free float would enable the central bank to steer the economy through interest rates and may even make the rouble attractive as an international reserve currency -- a cherished dream of the Russian leadership.
"Our main goal is a transition to an inflation targeting regime and (the rouble's) free float. I believe we can approach these decisions in the next two years," Ignatyev told parliament members during a committee hearing.
"I think we should not take any strict obligations in terms of stopping currency interventions in the next two years," Ignatyev said, adding that Russia was already half way towards a free float.
Analysts and policy makers have said the rouble decision will depend on Russia's current account balance and economic growth -- both heavily dependent on its oil and other commodity exports.
On Monday the World Bank cut its Russian forecast for this year to predict 7.5 percent contraction this year, down from an earlier forecast of 4.5 percent shrinkage. However, it revised up next year's forecast to 2.5 percent growth from stagnation.
POLITICAL SUPPORT
After devaluing the rouble by a third earlier this year, Russia's central bank has set a wide trading band of between 26 and 41 roubles to a dollar/euro basket, intervening in the market to iron out what it sees as excessive exchange rate volatility.
Ignatyev, a 61-year old technocrat and a former deputy to Finance Minister Alexei Kudrin, often faces criticism in parliament but with the firm backing of President Dmitry Medvedev his re-appointment is seen as a done deal.
Analysts see the re-appointment as a sign of gratitude from the country's leadership for the crisis management during the toughest weeks in September-October 2008 when the country's banking system was on the verge of collapse.
"The Chairman of the central bank will work as long as he has support from the political leadership, it is not like in the Bank of England or the Fed," said Troika analyst Anton Tabakh. The central bank is by law independent from the government.
A move to free float would be Russia's most significant economic decision since lifting capital movement restrictions in 2006, allowing the rouble to join the Brazilian real and South African rand among freely floating emerging currencies.
NO CONSENSUS
The move would require a legal change to formally charge the central bank with controlling inflation as opposed to its current task of ensuring exchange rate stability.
There is no consensus between policy makers on the free float, with Ignatyev's own deputy Alexei Ulyukayev saying a free float is possible next year and Kremlin economic aide Arkady Dvorkovich saying a decision would be premature.
Russia's Prime Minister Vladimir Putin, seen as an ultimate decision-maker in Russia, has not yet spoken on the issue but has repeatedly said that the rouble should eventually become an international reserve currency.
The World Bank expects Russia's current account to remain in surplus equal to 3 percent of gross domestic product in 2010 after 2.4 percent in 2009, which should provide fundamental support for the currency.
However, "possible oil price declines, the Russian banks' problems maturing into an acute form, or an emerging markets sell-off would be sufficient to weaken the rouble," said Alexander Morozov, HSBC's chief economist on Russia. (Writing by Gleb Bryanski, Editing by Ruth Pitchford)