Russia struggles with inflation

RUSSIA / FSU POLITICS - In Brief 13 May 2021 by Alex Teddy

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On May 13 the PM laid into businesses for driving inflation up due to excessive profits. He said the government might have to take measures to cap prices. He accused business of avarice. The recovery is in jeopardy and the Kremlin is worried about the impact of inflation on the fall 2021 elections.Inflation is at its highest level since 2016. The government has imposed prices caps and export limits on food. However, other essentials are suffering price hikes.Inflation was 5.5% per annum in April 2021. Core inflation is still going up. Gas, clothes, cars and furniture have seen 6.2% inflation.Real disposable incomes fell 3.5% in Q1 2021. Incomes are at the lowest for 10 years in real terms.Inflation expectations went to 12% in April 2021. Living standards have been going down since 2013.Putin prides himself on making life much better for people than it was in the 1990s.Inflation is up to rising food prices globally, stimulus packages, the fall of the RUB and supply chain disruption. RUB has fallen 20% since February 2020. Producers are passing on increased costs to consumers.Not enough manufactures goods are getting through. The Central Bank of Russia raised interest rates to 5% in 2021. It is likely that it shall rise twice more this year the bank said in its first ever interest rate forecast. The aim is to bring inflation down to 4%.Annual growth remains sluggish. Raising the interest rate will slow it even more. The Economy Minister is known to oppose raising the interest rate.The amount of outstanding bank loans has increased 15% in the 12 months to May 2021. More people are borrowing as the cost of borrowing increases.The Central Bank is under pressure to make the ...