By Gleb Bryanski and Vladimir Soldatkin

MOSCOW (Reuters) – The Russian economy is showing signs of overheating, causing concerns over high inflation, President Vladimir Putin stated on Thursday.

In his annual phone-in, Putin expressed support for the central bank's tight monetary policy while suggesting that it could have been implemented more swiftly. The bank is anticipated to raise its key interest rate by 200 basis points to 23%, the highest in over 20 years. This policy has faced considerable criticism from businesses.

Putin remarked, "There are some issues here, namely inflation, a certain overheating of the economy; the government and the central bank are already tasked with bringing the tempo down."

He mentioned a conversation with central bank governor Elvira Nabiullina, who indicated inflation could reach 9.2%-9.3% in 2024, exceeding the central bank's forecast of 8.5%. According to Putin, due to this tight monetary stance and government measures to cool the economy, growth rates are expected to decrease from 4% this year to between 2-2.5% in 2025, suggesting a "soft landing" to maintain macroeconomic stability.

INFLATION IS A BAD THING

Putin criticized the central bank for not utilizing other measures, aside from adjusting the key rate, earlier in cooling the economy. He also pointed out that the government could have collaborated with various sectors to enhance supply. "It would have been necessary to make these timely decisions. This is an unpleasant and bad thing — the rise in prices. But I hope that, while maintaining macroeconomic indicators, we will cope with this too," he added.

Putin attributed the high prices to Western sanctions and this year’s poor harvests from extreme weather across Russia’s agricultural regions. Recent inflation has particularly affected households, with significant increases in food prices; for example, tomatoes rose by 4.1% and cucumbers by 10% in just one week in December.

Last year, Putin issued a rare apology over increasing egg prices, and now the soaring cost of butter has led to thefts in some supermarkets. Additionally, households’ inflationary expectations, a crucial measure for the central bank, reached this year’s peak this month. Grigory Zakuraev, a factory worker, shared with Reuters, "1,000 roubles at the supermarket goes far less than it did three years ago. Everything has gone up in price… of course, you feel it on the wallet, the change in prices, inflation."