RUSSIA CALLING Conference

"We believe inflationary risks are higher,” Ulyukayev said in the lobbies of the fourth Russia Is Calling investment forum in Moscow sponsored by VTB Capital, part of the country’s second largest bank VTB.

The Central Bank Board of Directors will convene on October 5 to discuss the regulator’s interest rate policy, he said.

"We do not rule out that the interest rates will stay unchanged or will be raised,” he said.

However, even if interest rates are raised, this will hardly influence inflation in 2012, he said.

"This will hardly affect the inflationary result this year. We are speaking about medium-term inflationary risks,” he said, adding the time lag for an interest rate hike to reduce inflationary pressure was normally six to twelve months.

The regulator is more concerned about rising inflation next year, which is expected to be difficult, he said.

At a previous board meeting on September 13, the regulator raised the key refinancing rate by 0.25 percentage points to 8.25 percent.

Consumer price inflation in Russia hit a historic post-Soviet period low of 6.1 percent in 2011, but is expected to come close to 7 percent this year, exceeding the government’s 6 percent target.

The Russian government will make changes to tax legislation to ease foreign investment and spur the country’s economic development, President Vladimir Putin said on Tuesday.

"We’ll make changes to the tax law, we understand this,” Putin told the fourth Russia is Calling investment forum, sponsored by VTB Capital, part of the country’s second largest bank VTB.

Putin responded to a question about whether the government intended to simplify legislation for investors, after the latest tax changes significantly complicated investment procedures.

Heavily reliant on raw material exports, primarily oil and gas, Russia has been pushing for economic diversification for two decades, trying to promote more complex production with greater added value.

The strategy has been heavily reliant on attracting private, particularly foreign investment, with the government seeking to reduce the size of its presence in the economy.

The Russian government is prepared to implement anti-crisis measures next year, if a deteriorating global economic environment affects the domestic economy, President Vladimir Putin said on Tuesday.

"If external economic conditions deteriorate dramatically in 2013, we have mapped out anti-crisis, insulation measures, including mechanisms for re-distribution of budget spending,” Putin told the fourth annual investment forum, Russia Is Calling, sponsored by VTB Capital, part of the country’s second largest bank VTB.

These measures will be implemented only if necessary, Putin said, adding he hoped there would be no need for them.

In case of a crisis, the Russian government intends to swap federal loan bonds for banks’ securities to raise their capitalization and help them weather the financial and economic meltdown, he said.

"Besides, the government will grant additional state guarantees for companies operating in strategically important sectors,” Putin said, adding these measures would help stabilize the Russian economy in virtually any scenario.

"But we see the main guarantee for stability in maintaining the policy of economic growth, encouraging business activity, trade and investment,” Putin said, and highlighted the importance of Russia’s accession to the World Trade Organization this year.

"The participation in this organization is a key external economic priority for us. We expect this move will positively influence investors’ sentiments and open the way for promising projects,” he said.

Russian Economic Development Minister Andrei Belousov said earlier on Tuesday Russia will be able to balance its social obligations and defense spending with minimum annual GDP growth of 4-4.5 percent by tapping its investment potential.

The Russian government expects GDP to grow by 3.5 percent this year.