The Context: Central Bank Expected to Increase Interest Rates
President Vladimir Putin has stated that Russia’s annual inflation may escalate to approximately 8% this year. This comes just before the anticipated decision by the central bank to raise interest rates yet again in order to combat surging prices. According to a Reuters poll, most analysts predict a 100 basis points increase, bringing the key rate to 16% on December 15th. Factors contributing to the inflationary pressure include labor shortages, lending growth, increased government spending, and the weakening of the country’s currency.
Putin’s Outlook on the Economy
President Putin has consistently lauded Russia’s economic resilience in the face of Western sanctions. However, he tends to avoid addressing issues such as the currency’s weakness, persistent high inflation, and the impact of elevated interest rates on household purchasing power. These topics are particularly sensitive as the country prepares for the upcoming presidential election in March. In a year-end press conference, Putin emphasized the significance of economic growth, stating that GDP growth is expected to stand at 3.5% by the year-end—a positive development that marks significant progress following last year’s decline.
Putin Acknowledges Inflation Concerns and Government Responsibility
While discussing the economy, Putin also acknowledged the increase in inflation, which he expects to reach 7.5% or possibly even 8% by year-end. However, he emphasized that both the central bank and the government are implementing necessary measures to address the issue. During the press conference, a woman raised concerns about rising egg prices, which prompted Putin to express his apologies while attributing the problem to a failure of the government’s actions. The government, in response, has announced plans to exempt 1.2 billion eggs from import duties during the first half of next year, in an attempt to curb the significant 40% increase in prices observed throughout this year.