Russian President Vladimir Putin, who has berated the U.S. Federal Reserve for being “parasitic” with its bond purchases, said Fed Chairman Ben S. Bernanke is making a long-overdue move to scale back stimulus.
“A statement of this kind was expected for us -- an adjustment had to come sooner or later,” Putin said at the St. Petersburg International Economic Forum during a panel discussion with German Chancellor Angela Merkel. “You can’t endlessly pump liquidity into the economy without solving fundamental issues.”
Bernanke, speaking on June 19 after a two-day meeting of the Federal Open Market Committee, said the Fed may begin dialing down its unprecedented bond buying this year and end it in mid-2014 if the economy achieves the Fed’s objectives. His remarks sparked a selloff in global financial markets, with stocks falling and bond yields rising for two days.
Putin has criticized the Fed’s bond purchases for damaging the U.S.’s fiscal discipline and accused the country in 2011 of taking advantage of the dollar’s “monopoly” as the main reserve currency. Russia, which holds the world’s fourth-biggest gold and foreign-currency reserves, has reduced its holdings of U.S. government debt by 14 percent from a record high on Oct. 31, 2010, to $151.1 billion in April.
Putin said financial markets will undergo “corrections” as they assess the Fed’s changing policy stance. He urged the U.S. to take steps to ease its debt burden and fiscal strains.
Russia’s central bank raised the dollar’s share in its reserves to 45.8 percent as of Jan. 1 from 45.5 percent a year earlier while decreasing its currency allocation into the yen and the euro.