Russian President Vladimir Putin on Tuesday praised the central bank for keeping a lid on inflation with double-digit interest rates and said there were no insurmountable challenges when it came to limiting the rouble’s volatility.
Putin used his speech at Russia’s Eastern Economic Forum in Vladivostok to project a mood of financial calm, just weeks after the rouble’s slump past 100 to the dollar led to Kremlin criticism of the bank’s monetary policy and, ultimately, a 350-basis-point emergency rate hike to 12 per cent.
Annual inflation quickened to 5.15 per cent in August, above the 4 per cent target, and most analysts polled by Reuters expect the Bank of Russia to raise rates again on Friday, as Moscow balances its desire for lower rates and quicker economic growth with the need to limit price rises.
Putin, whose economic aide Maxim Oreshkin appeared to have spurred the central bank into action last month, said the bank had reacted “correctly” and in a “timely manner” to the rouble’s plunge and its impact on inflation.
Putin told the conference: “Yes, it reduces lending opportunities and slightly restrains the economy … but it is a significant factor for inflation risks.”
He added: “Of course, we need to influence this, but if we miss a situation that will lead to uncontrollable inflation growth, in the long run it will be even worse for the economy.”
Putin said Russian authorities, who were discussing reintroducing some capital controls last month, had tools to keep the currency and markets under control, but promised there would be no sudden moves to limit rouble volatility for now.
“On the whole, I don’t think there are any absolutely insurmountable problems or difficulties here,” Putin said.
ROUBLE BOUNCES BACK
The rouble hit its strongest level in almost six weeks against the dollar on Tuesday, buoyed by a gradual increase in exporters’ foreign currency sales and, according to some analysts, verbal interventions by the Kremlin, which said the rouble’s worst days had now passed.
Putin said the “restrained” return of foreign currency earnings was among many factors pressuring the rouble, but urged businesses to continue investing in Russia, promising expanded trade links with eastern partners.
“They must understand that it is more reliable to work here, there is no need to step on the same rake,” Putin said, using an idiomatic Russian phrase meaning to make the same, painful mistake repeatedly.
But he acknowledged that high inflation made it “practically impossible” to form business plans. Firms are also wary of the risks of foreign sanctions, asset seizures and a windfall profit tax that Moscow levied on some companies this year.
Putin said there was no need to raise more taxes for now, and, perhaps trying to allay businesses’ concerns, categorically stated there would be no widespread reversal of past privatisations, after some lawsuits filed by Russia’s general prosecutor’s office targeted some Russian industrial assets.
“There will be no de-privatisation, I can tell you that for sure,” Putin said.