Putin warns of the consequences of high inflation in Russia
Russian President Vladimir Putin warns of the consequences of out-of-control inflation for the domestic economy. “In conditions of high inflation, it is practically impossible to draw up business plans,” Putin said on Tuesday at the Eastern Economic Forum in Vladivostok. The central bank acted in a timely manner last month. However, high interest rates could inhibit lending and economic growth.
The central bank raised its key interest rate from 8.50 to 12.0 percent in August after the inflation rate was recently above the target mark of four percent. In addition, the fall in the exchange rate of the national currency, the ruble, should be stopped, which makes imports more expensive, which in turn can fuel inflation. The ruble is currently at its highest level against the dollar in almost six weeks. Experts also attribute this to the prospect of another interest rate hike this week.
Putin said that the ruble exchange rate was influenced, among other things, by the “restrained” repatriation of foreign exchange earnings by exporters. But no sudden steps would be taken to counter this. The government does not see any need to increase taxes at the moment. It imposed a windfall profits tax on some companies this year to boost their budget revenues. Putin added that he sees no problems with the volatility of the ruble. The relevant authorities had a number of tools at their disposal to keep the currency and markets under control.
According to economists, the Russian economy is being artificially fueled by military buildup, but is falling behind in future technologies due to Western sanctions following the war against Ukraine. A delicate situation for President Putin, especially since elections are due in March 2024. Consumers are also groaning under rising prices for basic foods. The head of the central bank, Elwira Nabiullina, initially received a lot of applause from politicians for her interest rate policy. But the fall in the ruble and high inflation have apparently caused her star to fall in Moscow – she is particularly criticized in the nationalist camp.