Economy
Putin says Russia faces big economic challenges, must keep inflation in check
© Reuters. Russian President Vladimir Putin chairs a meeting on economic issues via video link at the Novo-Ogaryovo state residence outside Moscow, Russia April 11, 2023. Sputnik/Gavriil Grigorov/Kremlin via REUTERS/File Photo
MOSCOW (Reuters) – Russian President Vladimir Putin said on Tuesday that inflationary risks were rising and he told the government and central bank to keep the situation under control.
The threat that surging prices will erode living standards is a concern for Putin as he prepares to launch an expected bid to be re-elected next March for six more years in the Kremlin.
At the same time, Russia’s budget is under strain from what Putin calls its “special military operation” in Ukraine, and the central bank was forced to jack up interest rates last week to halt a slide in the rouble.
“The scale and complexity of the tasks we are solving, and continue to solve, are of a really exceptional nature,” Putin said in televised remarks to government officials.
He said the overall situation was stable, but required vigilant monitoring and timely decisions.
After double-digit inflation in 2022, the pace of price rises dropped in the spring, but inflation is now above the central bank’s 4% target once more and rising steadily.
Russia’s widening budget deficit and stark labour shortage have contributed to rising inflationary pressure all year. When the rouble tumbled below 100 to the dollar last week, the central bank was forced to respond by raising interest rates by 350 basis points to 12%.
The rouble has since strengthened sharply, also helped by exporters increasing sales of their foreign currency revenue following discussions with Russian authorities.
Putin said volatility on financial markets had hampered companies’ investment decisions and was something that needed to be brought under control.
“The government and central bank need to actively use the instruments available to them,” he said. “Work is needed, among other things, on limiting unproductive, speculative demand, controlling the outflow of capital, monitoring the behaviour of the main participants of the financial market.”
Putin added that it was important for Russia to maintain a high level of industrial output.
Rising military costs are supporting Russia’s modest economic recovery this year with higher industrial production, but have already pushed budget finances to a deficit of around $29 billion – a figure compounded by falling export revenues.
Putin said the budget was forecast to be in surplus for July to September. “For the year as a whole, the excess of expenditure over income will be at the planned level – around 2% of GDP,” he said.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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