Naharnet

Russian central bank hikes rates to fight inflation fueled by military spending in growing economy

Russia's central bank raised its key interest rate by a full percentage point to 19% to combat high inflation as government spending on the military strains the economy's capacity to produce goods and services and drives up workers' wages.

The central bank said in a statement Friday that "growth in domestic demand is still significantly outstripping the capabilities to expand the supply of goods and services." It held out the prospect of more rate increases to return inflation from the current 9.1% to the bank's target of 4% in 2025.

Russia's economy continues to show solid 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.

Source: Associated Press


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