Rising inflation forced the central bank to raise interest rates to 12% last month, Russian President Vladimir Putin said on Tuesday, warning that the Russian economy would suffer if higher prices were allowed out of control.
“In conditions of high inflation, it is practically impossible to draw up action plans,” Putin said at the Eastern Economic Forum in Vladivostok.
He added that he sees no problems with the volatility of the ruble, and that the authorities have tools to keep the currency and markets under control.
The ruble hit its strongest in nearly six weeks against the dollar in early trading on Tuesday, fuelled by a gradual increase in foreign currency sales by exporters and the prospect that the central bank could raise interest rates again this week.
Putin said the ruble price was affected, among other things, by the “restricted” yield of foreign currency issuers’ returns, but said no sudden moves would be made, signalling capital controls and other steps to limit volatility.
He explained that the government sees no need to raise taxes at the moment, and has imposed an unexpected profit tax on some companies this year to increase budget revenues.
The Kremlin publicly called for a tightening of monetary policy last month as the ruble tumbled above $100 against the dollar, prompting the central bank to raise interest rates by 350 basis points to 12% on Aug. 15 at an emergency meeting.
Most analysts expect another rally next Friday, but some senior bankers said the stabilisation is more likely, especially as the ruble rose this week.
Putin said the central bank acted in time last month, but noted that high interest rates were constraining lending and economic growth.
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