President Vladimir Putin demanded steps to control the outflow of capital from Russia and to reduce volatility in financial markets, warning of the threat from rising prices following the slump in the ruble.
(Bloomberg) — President Vladimir Putin demanded steps to control the outflow of capital from Russia and to reduce volatility in financial markets, warning of the threat from rising prices following the slump in the ruble.
The government and the Bank of Russia “need to work, among other things, to limit unproductive, speculative demand in the economy, control capital outflow, and monitor the behavior of other financial market participants,” Putin said Tuesday at a televised meeting with officials. The main task now is to monitor inflation, and officials should “actively use the tools at their disposal,” he said.
The ruble, the third-worst performing currency this year among emerging markets, broke through 100 per dollar at the start of last week. That forced the central bank to call an extraordinary meeting to hike the benchmark rate by 3.5 percentage points to 12% from 8.5% last week to shore up the currency. Authorities also moved to adopt informal capital-control measures by asking exporters to sell more of their foreign currency revenue.
Russia Discusses Return to Capital Controls to Stem Ruble Slump
The rate hike was also part of a wider effort to subdue inflation before presidential elections due in March, according to people with knowledge of the matter.
Inflation accelerated to 4.3% in July. The central bank raised the key rate at its regular meeting last month for the first time since the immediate aftermath of the February 2022 invasion of Ukraine.
Bank of Russia Governor Elvira Nabiullina has singled out the deterioration in foreign trade as the main reason for the ruble’s weakness and attributed faster inflation to heavier government expenditure and labor shortages caused by the costly war effort that’s now in its 18th month.
Putin acknowledged divisions within the government and the central bank over economic policy, after the ruble sunk to lows last seen in the weeks following the start of the invasion.
“But we have always found a consensus so far, and we will find it now,” he said.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.