Russian 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, Bloomberg reported.
“I know that the real sector is unhappy with the rate hikes,” Putin said at his annual year-end press conference on Dec. 23. “But if it wasn’t done, we could end up like Turkey, with the same problem.”
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 over 20% of its value since the start of September as President Recep Tayyip Erdoğan 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.
Putin said he doesn’t meddle in the central bank’s work, but 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.”