(Bloomberg) — President Vladimir Putin demanded steps to contain capital outflows from Russia and reduce volatility in financial markets, warning of the threat of rising prices following the ruble’s slump.
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The government and the Bank of Russia “must work, among other things, to contain unproductive, speculative demand in the economy, control capital outflows and monitor the behavior of other financial market participants,” Putin said during a televised meeting with officials on Tuesday. . The main job now is to monitor inflation, and officials should “actively use the tools at their disposal,” he said.
The ruble, the third worst-performing emerging market currency this year, broke the 100 per dollar mark early last week. That forced the central bank to call an extraordinary meeting to raise benchmark rates by 3.5 percentage points to 12%, from 8.5% last week, to support the currency. The authorities also adopted informal capital control measures by asking exporters to sell a larger share of their foreign exchange earnings.
Russia is discussing returning to capital controls to counter ruble collapse
Those in the know said the rate hike was also part of a broader effort to curb inflation ahead of the presidential election in March.
Inflation accelerated to 4.3% in July. The central bank raised key rates 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 worsening foreign trade as the main reason for the ruble’s weakness, attributing the faster inflation to heavier government spending and labor shortages caused by the costly war effort now entering its 18th month .
Putin acknowledged divisions within the government and the central bank over economic policy after the ruble sank to an all-time low last seen in the weeks following the start of the invasion.
“But until now we have always found a consensus, and we will find it now,” he said.
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