-
Russia’s central bank has sounded the alarm on inflation amid a falling ruble and record labor shortages.
-
Policymakers kept rates on hold on Friday, but hinted that a rate hike could come soon.
-
“The option of a rate hike was also considered, but the consensus was to keep the rate unchanged and strengthen the signal.”
Russia’s central bank sounded alarm bells for the economy on Friday as the ruble’s depreciation and record labor shortages add to inflationary pressures.
Policymakers kept the benchmark rate unchanged at 7.5%, the first since September, but signaled a possible rate hike soon.
“The option of raising rates was also considered, but the consensus was to keep the rate unchanged and strengthen the signal,” Governor Elvira Nabiullina said at a news conference. According to Reuters“It has increased the chances of a rate hike,” he said.
In fact, central bank officials have discussed raising rates by 25-75 basis points, he said. This is as data released on Wednesday showed weekly consumer prices rose significantly.
The rate hike comes after the central bank raised its key policy rate to 20% shortly after Russia’s invasion of Ukraine last year in a bid to stabilize the ruble and financial markets after Western sanctions had frozen the Kremlin’s foreign exchange reserves. It will be the first time.
Since then, the central bank has cut interest rates as inflation cools. However, new forecasts expect inflation to accelerate from 3.5% to 4.5-6.5% by the end of the year.
“Accelerating fiscal spending, deteriorating foreign trade conditions and labor market conditions remain risk factors for accelerating inflation,” the central bank said on Friday, noting inflation risks were tipping further to the upside.
The warning looks like Russia has transitioned to a total war economyMeanwhile, Ukraine’s newly launched counterattack marks an increase in defense spending by the Kremlin.
Meanwhile, the ruble has depreciated by about 14% against the dollar by 2023, raising the prices of imported goods and further fueling inflation. The ruble fell above 83 rubles to the dollar on Friday, hitting a more than two-month low.
It also shows other data Russia suffers record labor shortage Vladimir Putin’s war against Ukraine has shocked workers. With an estimated 200,000 casualties in Ukraine, the army mobilized 300,000 troops last year and is expected to deploy hundreds of thousands more this year.
And the massive exodus of Russians to other countries to escape military service and economic hardships has exacerbated the labor shortage. A recent study estimated that: 1.3 million young workers Last year, I left the workforce alone,massive brain drain. “
Labor shortage was also a factor. Russian industrial production fell sharply last monthdown 5% from the previous month.
read the original article business insider
