Russian inflation rises fast

RUSSIA / FSU POLITICS - In Brief 09 Oct 2021 by Alex Teddy
On October 7 data were released about inflation showing it reached 7.4% per annum in September 2021 according to Rosstat, the state statistical agency. This is the highest inflation since 2016, which was itself a fairly heavy year for inflation. Inflation is worse than anticipated. It was 6.7% in August 2021, so the situation has deteriorated month on month - as has been the case across much of the world.In 2016 Russia was contending with an economic crisis occasioned by an abrupt drop in energy prices as well as sanctions. That caused the RUB to lose value sharply. The government likes to attribute its current economic travails to the coronavirus. But that is only part of the explanation. Food prices are rising fastest of all the index components. This is a headache for the government. Income has not increased for several years but prices have. In real terms Russians are becoming poorer. Food prices have risen 9.2% since October 2020. That is partly due to supply chain disruption consequent upon the coronavirus.Food is a major part of most household budgets.The Russian Central Bank (CBR) will probably raise interest rates yet again. They are 6.75% now and will probably go up to 7.25% by the end of October 2021 when the CBR has a meeting. The Governor of the CBR has been constantly warning the public that inflation is a long-term battle. The CBR has raised interest rates more than almost any central bank.The inflation target is 4%. Russia has not been at that for several years.The Kremlin paid out more welfare money to pensioners and military personnel before the September 2021 election. This electoral incentive may have helped fuel inflation. The elderly and the milit...

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