Kremlin says central bank is on top of inflation but government is watching closely

MOSCOW, Jan 20 (Reuters) -

Russia's central bank is monitoring the situation with rising prices in the country and taking measures to maintain stability, the Kremlin said on ?Tuesday when asked about the inflationary impact of a rise in valued-added ?tax.

VAT rose by 2 percentage points at the start ?of the year, to 22%, in a ?move designed ?to boost the state budget and compensate for increased military spending and ?falling oil and gas revenues.

Asked if ?the Kremlin was worried that inflation might exceed the central bank's forecast range of 4-5%, ?spokesman Dmitry Peskov told reporters ?there ?were no such concerns at this point.

"In fact, the central bank is monitoring the situation and taking the ?measures it deems necessary to maintain macroeconomic stability. So far, this has been successful," he said.

He said the government was watching the situation closely and "discussions will take place as necessary".

The Russian central bank has maintained high ?interest rates ?for years, squeezing consumers and drawing complaints from businesses, in an effort to bring inflation back ?down to its target of 4%.

The key interest rate now stands at

16%.

Consumer prices

rose

by 5.59% last year, compared to 9.52% in 2024, but household inflation expectations remain high.

Economists say the VAT rise sparked

faster-than-expected

price growth in the first half of this ?month, and some analysts predict the central bank may therefore refrain from cutting rates again when it next meets on February 13. (Reporting by ?Anastasiya Lyrchikova; Writing by Mark Trevelyan Editing by Andrew Osborn)