President Putin of Russia warned that the Russian economy would suffer if inflation were allowed to spiral out of control on Tuesday, saying that rising prices had prompted the central bank to raise interest rates to 12% last month.
At the Eastern Economic Forum in Vladivostok, Putin remarked, “In conditions of high inflation, it is practically impossible to form business plans.”
Putin stated his confidence that the government had the resources to stabilize the rouble and the markets.
Early Tuesday saw the rouble rise to its highest level versus the dollar in over six weeks, helped by rising expectations that the central bank would raise interest rates this week and exporters’ rising need for foreign currency.
Putin said that exporters not changing all of their foreign currency profits into roubles affected the rouble rate. Still, he also stated that there would be no abrupt actions regarding capital restrictions or other efforts to curb volatility.
According to him, there is now no reason to increase taxes. It has taxed corporations’ windfall profits this year to bring in more money for the budget.
Last month, when the rouble fell beyond 100 to the dollar, the Kremlin explicitly pressed for stricter monetary policy, prompting the central bank to increase rates by 350 basis points to 12% on August 15 during an emergency meeting.
While most experts anticipate another rate rise on Friday, several senior bankers have indicated that a hold is more plausible, particularly in light of the rouble’s recent gains.
Although he acknowledged that high-interest rates hamper lending and economic development, Putin claimed the central bank had moved promptly last month.
However, Putin warned that missing a circumstance that may cause unchecked inflation rise could have far more dire consequences for the economy in the long term.
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