Russian central bank hikes rate as inflation jumps
Russia's central bank on Friday raised interest rates to 19 percent as it warned inflation was running too high and it needed to cool the economy. Inflation was running at an annual rate of 9.05 percent in August, the country's statistics agency said earlier this week. The hike comes as Russia has faced economic headaches since launching its February 2022 Ukraine offensive. "Current inflationary pressures remain high," Russia's central bank said in a statement. "Further tightening of monetary policy is required to resume the disinflation process, reduce inflation expectations, and ensure the return of inflation to the target in 2025," it added. Russia has faced volatile prices since it sent troops into Ukraine in February 2022, triggering a barrage of Western sanctions and strict counter-measures in a bid to stabilise the economy. A splurge in government spending – up almost 50 percent since 2021 – to fund the conflict has seen billions poured into the military and defence sector. That has helped shield the economy from collapse that many predicted, but also pushed prices up fast. "The labour market remains tight. Unemployment has dropped to a new historic low," the central bank said. Inflation was slightly down in August but still well above the government's target level of four percent. The central bank has aggressively raised rates over the last year, taking them back towards the emergency level of 20 percent that was introduced straight after the start of the conflict. It says such hikes are needed to stop the economy "overheating" and stave off the risk of "stagflation" – where growth slows but inflation remains high. But steep borrowing costs have hit some consumers and businesses, many of which rely on short-term debt. (AFP)