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The
central bank said in a statement that “growth in domestic demand
is still significantly outstripping the capabilities to expand
the supply of goods and services.” Inflation, the statement
said, “is running considerably above the Bank of Russia’s July
forecast,” and “inflation expectations continue to increase.” It
held out the prospect of more rate increases in December.
Russia’s economy continues to show growth as a result of
continuing oil export revenues and government spending on goods,
including for the military. One result is inflation, which the
central bank has tried to combat with higher rates that make it
more expensive to borrow and spend on goods, in theory relieving
pressure on prices.
The new interest rate is the highest in Russia since the breakup
of the Soviet Union in 1991. The previous high was in February
2022, when the central bank raised the rates to a
then-unprecedented 20% in a desperate bid to shore up the ruble
in response to crippling sanctions that came after the Kremlin
sent troops into Ukraine.
Russia’s economy grew 4.4% in the second quarter of 2024, with
unemployment low at 2.4%. Factories are largely running at full
speed, in many cases to produce items that the military can use
such as vehicles and clothing. In other cases, domestic
producers are filling gaps left by imports from abroad that have
been interrupted by sanctions or by foreign companies’ decisions
to stop doing business in Russia.
Government revenues are supported by economic growth and by
continuing exports of oil and gas with less-than-airtight
sanctions and a $60 price cap imposed by Western governments on
Russia oil. The cap is enforced by barring Western insurers and
shippers from handling oil priced over the cap. But Russia has
been able to evade the price cap by lining up its own fleet of
tankers without Western insurance, and it earned some $17
billion in oil revenues in July.
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