The Bank of Russia raised its key interest rate to 8.5% this morning, marking one of the most anti-inflation moves by any Central Bank currently. Inflation, when last reported for Russia, was running at 3.2%.
It means Russia will have a real interest rate of over 5% (the interest rate less Inflation). While the US currently has a real interest rate (Fed Funds less Inflation) of only about half the Russian Rate, at 2.25%.
In a prepared statement, Elvira Nabiullian, the Head of the Russian Central Bank, noted that Inflation is heading to a point higher than the Bank’s target inflation.
The increase in Inflation comes from a couple of factors, including increased consumer demand as Russia recovers from the worldwide recession caused by the Covid-19 Pandemic.
Like America, Russia also suffers from a labor shortage, which is driving wages higher, another driver for Inflation.
And finally, the strong demand by the Central Government, presumably caused by the need to supply military equipment in the Special Military Operation in Ukraine, has created additional demand.
You can read Ms. Nabuillian’s complete comments here:
http://www.cbr.ru/eng/press/event/?id=16940
