Economy in Russia

Weak rouble and sanctions fuel inflation

(Bild: APA/AFP/Natalia KOLESNIKOVA)

New sanctions from the West, a weaker rouble and a smaller harvest have fueled inflation in the country, according to the Russian central bank. These factors were responsible for the high inflation rates in December 2024 and January 2025, the central bank announced.

Inflation in Russia stood at 9.52 percent last year. In 2023, it was still at 7.42 percent. However, the central bank's target is 4.0 percent. At their most recent interest rate meeting in December, the monetary authorities surprisingly left the key interest rate unchanged at 21% despite the high inflation rates.

Inflation a growing problem since the start of the war
Inflation has now become the biggest economic challenge since Russia launched a war of aggression against Ukraine in February 2022. In the country itself, the authorities continue to speak of a "special military operation". Most analysts expect inflation to be higher this year than the central bank's annual forecast of 4.5 to 5.0 percent.

From the point of view of the Russian central bank, it is important to adhere to the key points for the 2025 state budget in order to control inflation. The key points for the 2024 budget had been adjusted to increase the deficit twice during the year. The central bank also stated that it was no longer possible to maintain high growth rates in an environment characterized by a shortage of labour and production capacity. Further stimulation of the economy would drive the economy into recession. The next interest rate decision by the Russian central bank is due on February 14.