Putin warns of economic difficulties if inflation gets out of control

Russian President Vladimir Putin said on Tuesday that rising inflation rates forced the central bank to raise interest rates to 12 percent last month, warning that the Russian economy would suffer if prices were allowed to get out of control.

“In the event of high inflation, it will be practically impossible to develop action plans,” Putin added at the East Economic Forum held in the city of Vladivostok.

The Russian President indicated that he does not expect problems related to fluctuations in the ruble exchange rate, adding that the authorities have a package of tools to keep the currency and markets under control.

The ruble recorded its strongest level in about six weeks against the dollar in early trading on Tuesday, driven by a gradual increase in exporters’ selling of foreign currencies in light of expectations that the Russian Central Bank may raise interest rates again this week.

Putin said that the ruble exchange rate was affected, among other things, by the “restricted” return of exporters to earn revenues in foreign currencies, but he stated that the authorities would not take sudden steps, referring to capital control measures and other steps to reduce the volatility of the ruble exchange rate.

He stated that the government does not see a need to increase taxes currently. The government imposed unexpected taxes on profits on some companies this year to increase budget revenues.

The Kremlin publicly called for tightening monetary policy last month, with the ruble exchange rate falling to more than 100 rubles to the dollar, prompting the central bank in an emergency meeting to raise interest rates by 350 basis points to 12 percent on August 15.