MOSCOW 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, signaling 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.
"Last year and the year before, we reacted quite energetically to this with the help of our stocks of grain reserves. We need to think about what to do regarding this."
The government's farm policy chief, Deputy Prime Minister Arkady Dvorkovich, has ruled out restrictions on grain exports or any special export tariffs.
Russia's government agricultural commission, headed by Dvorkovich, this week will consider a possible start of grain sales from the government's intervention stocks.
But other officials say that export limits will be needed, possibly from next year, if wheat shipments continue on a large scale. Russia has emerged in recent years as the world's third-largest grain exporter.
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.
While still prime minister, Putin ordered a delay to hikes in household utility charges until after the March presidential election, causing inflation to rise at mid-year. Higher pre-election spending has also pumped cash into the economy.
Russia's central bank raised interest rates in September for the first time in nine months, and First Deputy Chairman Alexei Ulyukayev set the scene for a further increase.
"We don't rule out holding rates or raising them," Ulyukayev told reporters on the fringes of the same conference.
Policymakers are to review interest rates this Friday. Economists polled by Reuters expect the central bank to jack up rates by a quarter point before the end of this year but probably not this month.
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.
Putin played up Russia's prospects, despite concerns about the slowdown in China and the euro zone crisis, and said he expected the economy to achieve average growth of 4 percent over the next three years.
"Experts say that these dynamics will continue on average over the next three years," he said. "This is lower than before the crisis, but the growth is much more balanced and of higher quality."
Putin spoke after his government submitted a draft three-year budget to parliament, which targets balancing the books by mid-decade while keeping spending almost flat in real terms.
The budget is based on an oil price of over $100 per barrel, but Putin also said the "non-oil" deficit, which strips out energy taxes, would fall over time.
Russia has outpaced most developed economies but lags China, where growth is still close to 8 percent, and India, whose economy grew at a 5.5 percent rate in the three months to June.
Finance Minister Anton Siluanov said annual government borrowing abroad in the next few years would not exceed the $7 billion it raised in a Eurobond sale in March. Russia's public debt amounts to around 13 percent of its gross domestic product.
(Writing by Douglas Busvine; Editing by Jason Bush and Jane Baird)