Russian President Vladimir Putin acknowledged that inflation is a major challenge for Russia during his annual Direct Line question-and-answer session on Thursday, describing the economy as "overheated."
Speaking to Russian citizens, Putin outlined the government's efforts to tackle rising prices. "There are some issues here, namely inflation, a certain overheating in the economy, and the government and the central bank are actually tasked with reducing the pace," Putin said, according to a Reuters translation.
Russia's consumer price index was 8.9% in November compared to the same period last year, compared to 8.5% in October. Food prices, especially milk and dairy products, were the main driver of the increase.
Inflationary pressures have been exacerbated by the weaker ruble, which has made imports more expensive, and rising military spending, which has strained labor and production resources. Russia’s economy under Putin has been interesting since his invasion of Ukraine in 2022.
Rising prices and wage growth
"Of course, inflation is a worrying signal," Interfax reported, noting that wages grew by 9% in real terms, slightly outpacing inflation, while disposable income also rose.
The comments came as Russia's central bank was widely expected to raise its benchmark interest rate by 200 basis points to 23% on Friday, the highest level in a decade.
Putin attributed the price hikes in part to international sanctions, noting that external restrictions had increased logistics costs. However, he also criticized domestic monetary policies, suggesting that alternative strategies could have been used to curb inflation.
On the other hand, geopolitical tensions over global currency dynamics have intensified since Donald Trump won the US election in November. At the BRICS summit hosted by Russia this year, Putin introduced BRICS Pay, a payment system designed to bypass the dollar-centric global financial system.
US President-elect Donald Trump has warned of dire consequences for countries that seek to marginalize the dollar. Trump threatened to impose 100% tariffs on BRICS countries that try to replace the dollar in trade, saying: “They should expect to say goodbye to the great American economy.”
However, the expansion has not been universally welcomed. India’s central bank governor, Shaktikanta Das, made it clear on December 6 that the country is not seeking to ditch the dollar or work toward a common BRICS currency.Byandas, following Trump’s sharp criticism of BRICS’ ambitions to undermine the dollar’s supremacy.
Argentinean president Javier Milei, known for his anarcho-capitalist stance, withdrew from BRICS shortly after taking office in December 2023. Citing ideological differences, he rejected “an alliance with communists.”
Likewise, Saudi Arabia’s engagement with BRICS remains ambiguous. Ahead of the October summit in Kazan, Russia, it declined to confirm its membership. While Saudi Foreign Minister Prince Faisal bin Farhan attended the summit and expressed a commitment to strengthening ties with BRICS, he stopped short of pledging full membership.
Saudi Arabia's unclear position prompted the Russian Foreign Ministry to reverse an earlier statement that referred to it as a member of BRICS.
Criticism of the bloc’s recent expansion has also emerged from within. Jim O’Neill, the economist who coined the term “BRICS,” has questioned the group’s direction. Speaking at an event in London in November, he dismissed the group’s evolution into a political entity and described its expansion as a move driven more by symbolism than substance.