Russian President Vladimir Putin warned today, Tuesday, that inflation risks are escalating and urged the government and the central bank to maintain control over the situation. In statements broadcast on television to government officials, Putin said, "The scale and complexity of the tasks we are solving and continue to solve are truly exceptional." He added that the overall situation is stable but requires vigilant monitoring and timely decision-making.
After inflation exceeded ten percent in 2022, the pace of rising prices slowed in spring, but inflation is now above the central bank's target of four percent and continues to increase. The growing budget deficit and severe labor shortages have added to inflationary pressures throughout the year. When the ruble fell below 100 against the dollar last week, the central bank had to intervene by raising interest rates by 350 basis points to 12 percent.
Rising military costs support Russia's modest economic recovery this year with increased industrial production, yet they have already pushed the budget into a deficit of approximately 29 billion dollars, a situation exacerbated by declining export revenues. Meanwhile, Russia's budget is under pressure due to what Putin refers to as the "special military operation" in Ukraine, prompting the central bank to raise interest rates last week to halt the ruble's decline.
Despite this, Putin expects the budget to record a surplus in the third quarter of the year. The Russian president is concerned that rising prices could lead to a decline in living standards as he prepares for what is expected to be an attempt to secure a new six-year term in March.
