Russia sharply raises key rate as prices soar

MOSCOW: Russia’s central bank once again sharply raised its interest rate on Friday as authorities are under pressure to slow rapidly growing inflation and soaring food prices.

Inflation has been rising steeply for months, with food prices skyrocketing, in a blow for the many Russians with low incomes and little savings.

At a meeting on Friday, the Bank of Russia increased its key rate by 100 basis points to 8.5 per cent.

“Inflation is developing above the Bank of Russia’s October forecast,” the central bank said in a statement, adding it reached a “six-year high” in October and November.

The bank said that as of December 13, inflation stood at 8.1 per cent and did not rule out further hikes.

“If the situation develops in line with the baseline forecast, the Bank of Russia holds open the prospect of further key rate increase at its upcoming meetings,” its statement said.

After months of historically low inflation, consumer prices began to climb in March 2020, driven by a drop in the ruble’s value in the middle of the coronavirus pandemic.

The central bank started raising its historically low rate the same month.

Last month, Russia’s central bank chief Elvira Nabiullina warned that rising inflation was a “real disaster” for the country and urged the government to take action.

“High inflation really destroys prosperity and is a real disaster that makes people poorer,” said Nabiullina, who is one of the few officials occasionally critical of government policies.

Nabiullina has criticised government measures to cap the prices of certain goods as ordered by Putin.