Russian President Putin warns of economic consequences if inflation is not controlled
Russian President Vladimir Putin attends a meeting with representatives of business, officials and other participants of the 8th Eastern Economic Forum via a video link in Vladivostok, Russia, September 12, 2023. Sputnik/Mikhail Metzel/Pool via REUTERS
Increasing inflation forces Russian central bank to hike interest rates
- Russian President Vladimir Putin warns of economic consequences if inflation is not controlled
- High inflation makes it difficult to form business plans
- Putin sees no problems with rouble volatility
- Rouble hits strongest level in almost six weeks against the dollar
- No sudden moves will be made in terms of capital controls or other steps to limit volatility
- Government sees no need to raise taxes for now
- Central bank may hike rates again this week
- High rates restrain lending and economic growth
Background
VLADIVOSTOK, Russia, Sept 12 (Reuters) – Russian President Vladimir Putin on Tuesday said increasing inflation had forced the central bank to hike interest rates to 12% last month, warning that Russia’s economy would suffer if price rises were allowed to get out of control.
“In conditions of high inflation, it’s practically impossible to form business plans,” Putin said at the Eastern Economic Forum in Vladivostok.
Putin said he saw no problems with rouble volatility, and the authorities had a cache of tools to keep the currency and markets under control.
The rouble hit its strongest level in almost six weeks against the dollar in early trade on Tuesday, buoyed by gradually increasing foreign currency sales by exporters and prospects that the central bank may hike rates again this week.
Putin said the rouble rate was affected, among other things, by exporters not converting some foreign currency earnings to roubles, but he said that no sudden moves would be made in terms of capital controls or other steps to limit volatility.
He said the government saw no need to raise taxes for now. It has imposed a windfall profit tax on some companies this year to increase budget revenues.
The Kremlin publicly called for tighter monetary policy last month as the rouble tumbled past 100 to the dollar, leading the central bank to raise rates by 350 basis points to 12% on Aug. 15 in an emergency meeting.
Most analysts expect another hike this Friday, but some top bankers have said a hold is more likely, especially as the rouble has strengthened this week.
Putin said the central bank had acted in a timely manner last month, but noted that high rates restrain lending and economic growth.
“Of course, we need to influence this, but if we miss a situation that will lead to uncontrollable inflation growth, in the long run it will be even worse for the economy,” Putin said.
Reporting by Reuters, writing by Alexander Marrow; Editing by Mark Trevelyan
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