Russian President Vladimir Putin said he was worried about rising inflation but stopped short of calling for curbs on grain exports to contain food prices after drought decimated this year's harvest. Inflation, currently exceeding the 6 percent year-end target, poses a greater risk than an economic slowdown, a senior central banker said, signalling that interest rates could go up as soon as this week.
Russia roiled world markets in 2010 when it slapped a year-long ban on grain exports after severe drought destroyed a third of its crops. A fierce debate continues in government circles over whether a similar step is justified now. Putin, addressing an investor conference in Moscow on Tuesday, blamed rising prices largely on bad harvests in major grain exporters including the United States.
"This is having a significant effect on the situation inside our country - grain prices are, after all, rising here. I have, by the way, drawn the attention of the government to this," he told the conference, hosted by investment bank VTB Capital. Economists say that while a food price shock partly explains the rise in Russia's inflation rate to 6.3 percent as of mid-September, policy decisions that predated Putin's return to the Kremlin this year have also played a part. Russia is bucking a global trend of monetary easing, even while its economy recovery shows signs of faltering. Its main policy rate, the one-day fixed repo rate, stands at 6.5 percent.