**Russia‘s Inflation Hits Year-High**
Inflation in Russia has reached its highest levels in nearly a year. The Moscow Times reported on December 25 that Russia’s inflation rate is driven by war spending and rising food prices.
**Higher Interest Rates**
To control the increasing inflation, Russia’s Central Bank has raised its interest rate from 7.5% in July to the current 21%. This is the highest level since the early 2000s. The bank aims to curb accelerating inflation fueled by war expenditures.
**Food Prices Surge**
Consumer prices rose 0.33% during the week of December 17-23, pushing year-to-date inflation to 9.5%. Food prices have surged by 11.41%, which is the steepest increase since October 2022. Essential goods like potatoes, onions, cabbage, and butter have seen dramatic price hikes since the start of the year.
**Criticism from Industry Leaders**
The Central Bank’s aggressive interest rate hikes have drawn criticism, particularly from Russia’s military-industrial complex. The CEO of state-owned defense giant Rostec warned that continued rate increases could bankrupt businesses. However, Central Bank Governor Elvira Nabiullina maintains that the high rate is essential to curb inflation.
**Balancing Inflation Control and Economic Stability**
The Central Bank is expected to reassess the feasibility of further rate hikes in its next meeting as it struggles to balance inflation control with economic stability. Rising costs of basic goods, coupled with internal economic pressures from the war, highlight the financial challenges Russia faces under its strained war economy.
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