Russian President Vladimir Putin said today that increasing inflation had forced the central bank to hike interest rates to 12% last month, warning that Russia's economy would suffer if price rises were allowed to get out of control.
"In conditions of high inflation, it's practically impossible to form business plans," Putin said at the Eastern Economic Forum in Vladivostok.
Putin said he saw no problems with rouble volatility, adding that the authorities had a cache of tools to keep the currency and markets under control.
The rouble hit its strongest level in almost six weeks against the dollar in early trade today, buoyed by gradually increasing foreign currency sales by exporters and prospects that the central bank may hike rates again this week.
Putin said the rouble rate was affected, among other things, by exporters not converting some foreign currency earnings to roubles, but he said that no sudden moves would be made in terms of capital controls or other steps to limit volatility.
He said the government saw no need to raise taxes for now. It has imposed a windfall profit tax on some companies this year to increase budget revenues.
The Kremlin publicly called for tighter monetary policy last month as the rouble tumbled past 100 to the dollar, leading th ecentral bank to raise rates by 350 basis points to 12% on August15 in an emergency meeting.
Most analysts expect another hike this Friday, but some top bankers have said a hold is more likely, especially as the rouble has strengthened this week.
Putin said the central bank had acted in a timely manner last month, but noted that high rates restrain lending andeconomic growth.
"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.
He also said today that there would be no"de-privatisation" of companies in Russia.
But he also said that in comments about high domestic fuel prices that the government had failed to react in time to the rising price of oil on global markets. Putin also said it was important to provide fuel fo ragricultural producers.
