The Central Bank of Russia has come under pressure due to rising inflation and economic contradictions. The key interest rate remains at 21%. This is the highest figure since the beginning of the century, but analysts are confident that it should be expected to increase.
This is reported by the Swiss German-language newspaper Neue Zürcher Zeitung.
Russian military economy is bursting at the seams
Despite the high key rate, inflation in December was over 9%, indicating that the economy is overheating due to military spending and reduced availability of capital due to sanctions.
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It is noted that the Central Bank of the Russian Federation is striving to ensure that inflation is no more than half of this level. The growth of key interest rates also leads to an increase in interest rates on loans and credits.
The newspaper writes that the population of the Russian Federation is suffering from the fact that it is forced to pay more and more for everyday goods. At the same time, it is more important for many companies that the Central Bank of the Russian Federation does not tighten the reins even more.
Many companies in Russia have become increasingly indebted over the past year. Western sanctions have significantly dried up foreign sources of capital. Some interest subsidies that the state had been funding for a long time have expired. Taxes also increased at the end of the year.
There are also seasonal reasons for the recent sharp rise in inflation in Russia, such as a poor harvest.
However, the main problem is the militarization of the economy and the colossal growth of defense production: it sucks resources out of other areas of the economy. There is a growing shortage of labor and capital, which is exacerbated by Western sanctions. The newspaper notes that this has not driven the economy into a dead end, but has led to its overheating.
High inflation in Russia will likely persist into 2025. In a survey conducted by the Central Bank of the Russian Federation in December, more than 30 Russian analysts said they expected inflation to be above 8% in 2025. In October, they had predicted 6.5%.
— At the same time, it can be assumed that prices have actually risen even more than officially stated, as indicated by the absurdly high level of interest rates compared to inflation, writes NZZ.
In 2024, GDP growth was predicted to be 4%. But already in 2025, analysts in the Russian Federation expect it to grow by only 1.5%. It is also noted that against the background of the fact that military production in the Russian Federation is reaching its limits, the aggressor country is increasingly repairing old Soviet models of equipment than producing new ones.
NZZ believes that Russia is facing stagflation – high inflation with economic stagnation. The price of crude oil, which remains below $80 per barrel due to a global supply glut, is also unlikely to give a significant boost. In addition, the weakness of the ruble weakens the impact on export revenues.
