The Russian President stated today, Tuesday, that rising inflation rates have forced the central bank to raise interest rates to 12 percent last month, warning that the Russian economy will suffer if prices are allowed to spiral out of control. Putin said at the Eastern Economic Forum held in Vladivostok, "In the case of rising inflation, it will be practically impossible to formulate action plans."
He noted that he does not expect issues related to fluctuations in the exchange rate of the ruble, adding that authorities have a set of tools to keep the currency and markets under control. Putin mentioned that the ruble's exchange rate has been affected, among other things, by the return of "restrained" exporters to earn revenues in foreign currencies, but stated that authorities will not take sudden actions, referring to capital control measures and other steps to limit the ruble's exchange rate volatility.
He indicated that the government does not currently see a need to increase taxes. The government had imposed unexpected profit taxes on some companies this year to boost budget revenues. Putin also noted that the central bank acted in a timely manner last month, but remarked that rising interest rates restrict lending and economic growth. The Kremlin had publicly called for tightening monetary policy last month as the ruble's exchange rate fell to over 100 rubles per dollar, prompting the central bank in an emergency meeting to raise interest rates by 350 basis points to 12 percent on August 15.
