2024-09-14 21:20:31
Inflation in Russia remains at a high level. The central bank is trying to counteract this by raising interest rates.
The Russian central bank has unexpectedly raised its key interest rate again in light of the growing risk of inflation. The key interest rate is rising by 1.0 percentage points to 19.0 percent, the Bank of Russia announced on Friday. Economists had expected the key interest rate to remain unchanged. The central bank last raised interest rates by two points at the end of July. The central bank has now announced further increases. “The Bank of Russia is keeping the option open to raise the key interest rate at its next meeting,” the statement said.
The central bank sees growing inflation risks. It assumes that inflation will be higher at the end of the year than was forecast in July. At that time, an inflation rate of 6.5 to 7.0 percent was expected. The central bank is aiming for a rate of four percent. “The growth in domestic demand continues to significantly exceed the possibilities for expanding the supply of goods and services,” it says, describing the reasons for the price development.
In August, the inflation rate was 9 percent. The underlying price pressure remains high and there are no signs of a slowdown, writes the central bank. Economic growth has recently weakened somewhat. “This slowdown was probably not primarily due to a cooling of domestic demand, but to increasing supply-side bottlenecks and a slowdown in foreign demand,” writes the central bank. Consumption remains strong despite a slight slowdown.
According to economists, the Russian economy is supported primarily by arms production, which was massively expanded during the war against Ukraine. In addition, the shortage of workers is driving up wages. This supports consumer demand. However, it also prevents an expansion of production, which drives up prices.