Putin Says Inflation Can Be Harnessed

The government needs to do more to deal with inflation, which soared to 11.9 percent last year and could exceed government forecasts of 8 percent this year, President Vladimir Putin said Tuesday.

Putin, however, told Federation Council senators that he was confident the problem would be brought under control, and he made wide-ranging calls for improvements to the country's welfare system.

The remarks appeared aimed at setting a future agenda for Putin, who has said he will become prime minister if his favored successor, First Deputy Prime Minister Dmitry Medvedev, is elected in the March presidential election.

Although the economy has boomed during Putin's eight years in office, low-income earners and pensioners have struggled to keep pace with the rise in prices for staple goods.

Inflation reached 11.9 percent in 2007, exceeding the government's initial forecast of 8 percent. Economic Development and Trade Ministry projections released Monday said inflation could hit 1.8 percent this month, which puts the economy on target to exceed last year's figures.

The president expressed his concern about a drop in the volume of savings accounts in banks, saying that indicated inflation had begun to leave its mark.

The president also called for pensions and salaries of public sector employees, such as teachers and health care workers, to be raised and urged additional support to be provided for families.

Under Putin, the government has initiated a series of national projects aimed at improving the country's public health, education, housing and agriculture sectors.

The projects are overseen by Medvedev.

"We have gained experience in the development of social welfare while implementing the national projects," Putin said.

Government coffers are flush these days with tax revenues from oil and gas pouring in because of record high world oil prices.

Pressure has grown from some lawmakers to spend the money filling up the stabilization fund, which was designed to sop up extra oil money and keep inflation in check.

But Putin warned against resorting to populist measures.

"It is easy to promise everything, and even achieve it formally, but these promises can end up in dashed hopes and negative effects on people's welfare," he said.