ADVERTISEMENT

Putin Hails Central Bank for Averting Turkish-Style Crisis

President Vladimir Putin endorsed the Bank of Russia’s hawkish policies to battle inflation.

Putin Hails Central Bank for Averting Turkish-Style Crisis
Vladimir Putin, Russia's president, reacts during a speech in Moscow, Russia. (Photographer: Andrey Rudakov/Bloomberg)

President Vladimir Putin endorsed the Bank of Russia’s hawkish policies to battle inflation, saying the country could end up facing an economic crisis like Turkey’s if it failed to raise interest rates. 

“I know that the real sector is unhappy with the rate hikes,” Putin said at his annual year-end press conference Thursday. “But if it wasn’t done, we could end up like Turkey, with the same problem.” 

Putin Hails Central Bank for Averting Turkish-Style Crisis

The Bank of Russia raised its benchmark interest rate by 100 basis points at its final meeting of the year last week, bringing the total increase to 425 basis points in 2021, warning more hikes may be needed to tame inflation, which is running at more than twice the central bank’s 4% target. 

Russia has averted a crisis like in Turkey, where the lira lost almost half its value from the end of September to the end of last week as President Recep Tayyip Erdogan leaned on the central bank to slash borrowing costs in an effort to lure investment and shore up his waning popularity. The bank’s key rate now stands at 14%, more than seven percentage points below consumer inflation, and the moves have left investor confidence in the regulator in tatters. 

Bank of Russia Dashboard Shows Drivers of Aggressive Rate Cycle

Earlier this month, Putin said inflation is a major concern for officials and citizens, and authorities need to bring it to the target next year. Still, he said during the news conference he doesn’t meddle in the central bank’s work, and rated its policies positively. 

He also found time to compare Russia favorably with its biggest geopolitical foe, the U.S. 

“If we take the world’s leading economy, the U.S., they have inflation of 6.1-6.2% with a target of 2%,” Putin said. “We also have a large 8% rate and our target was 4%, so we have doubled target, and they have tripled it.” 

The government deserves “satisfactory marks” for managing the economy, which is on track for 4.5% growth this year, while disposable incomes are set to rise 3.5%, Putin said.

©2021 Bloomberg L.P.