During December…the war raises the inflation rate in Russia with the decline of the ruble

Consumer price inflation in Russia has risen again over the past month, while the prices of almost all goods and services continue to suffer due to the fallout from the Russian war against Ukraine that began in February 2022.
According to official data issued on Wednesday, consumer prices in Russia rose by 9.5% annually during December, compared to 8.9% in November, so that the inflation rate in Russia remains higher than the level targeted by the Russian Central Bank for the fifth year in a row.

The ruble declines against the dollar

Bloomberg News Agency quoted Vladimir Chernov, economic analyst at Freedom Finance Global, as saying that the recent decline of the price of the Russian ruble against the dollar by 10% due to the new package of US sanctions on Russia, means that the increase in Russian interest rates was not enough to curb inflation in last year.
The energies of the Russian economy are focused on meeting the needs of the Russian military machine in Ukraine, at a time when consumer demand has increased against the backdrop of huge government spending and rising wages due to the scarcity of labor.

External restrictions on Russian imports due to Western sanctions also lead to higher prices in the local market.

Fixing the key interest rate

Last month, the Russian Central Bank kept its key interest rate at 21%, delaying further increases, while struggling to curb inflation caused by government spending on the war against Ukraine.
The decision comes amid criticism from influential business leaders, including those close to the Kremlin, that the high interest rate is restricting business activity and the economy.
The central bank said in a statement that credit conditions increased “more than expected” due to the interest rate hike last October, which brought the key rate to its current record level.
The bank added that it will evaluate the need for any future increases at its next meeting, and that inflation is expected to decline to an annual rate of 4% next year from the current 9.5%.