Inflation continued to accelerate in October in Russia, with prices rising 6.7% year-on-year, according to figures released Friday by the national statistics agency Rosstat. The price increase reached exactly 6.69% year-on-year in October, up from 6% in September, according to Rosstat, continuing the upward trend seen since spring.
Thus, inflation is increasingly devouring the purchasing power of Russians, already weakened by the effects of the sanctions decided against Russia after the launch of its offensive in Ukraine, and by the weakness of the ruble. If President Vladimir Putin repeats that Russia has stood up to these sanctions, the conflict in Ukraine, unleashed at the end of February 2022, is weighing heavily on Russian finances and the economy.
Faced with the acceleration of inflation, the Russian president urged his Government and the Russian Central Bank (BCR) on November 1 to “reduce inflation” in a “coordinated” manner, warning that the pressure exerted by sanctions was going to increase. . The problem is that if the BCR has set the goal of containing inflation, the Ministry of Finance first wants to reduce the volatility of the ruble, two phenomena that require different levers of action.
Defense spending explosion
In fact, many Russians, scarred by the 1998 economic crisis that devoured their savings, fear that their savings and purchasing power will fade further. In recent months, the BCR has already raised its interest rate several times (currently at 15%) to curb inflation, accompanied by the weakening of the ruble, which has stabilized in recent days below the symbolic threshold of “100 rubles to 1 dollar”.
Officially, Russia is targeting inflation of around 4%. But the prospects for prices rising slowly in the coming months are not good, observers say. The government has planned an explosion of almost 70% of defense spending next year, reaching 6% of the national GDP, a spiral that could further accelerate inflation, the BCR has already warned.
Especially since, under the weight of sanctions and the declared determination of Europeans to end their energy dependence on Moscow, income from the sale of hydrocarbons fell by 26.3% between January and October of this year, according to latest figures from the Ministry of Finance. In this context, the BCR has already said that it expects a slowdown in economic growth in the second half of the year, which should however stabilize at the end of December “at +3%”, after a complicated 2022, according to the minister. Latest economic development forecast, Maxime Rechetnikov, published on Friday.
Source: BFM TV
