The Central Bank of Russia has begun buying the country’s sovereign debt and raised its benchmark interest rate to 20%
Save time by listening to our audio articles as you multitaskOn March 23rd the government announced that consumer prices rose by 1.9% in the seven days to March 18th, following increases of 2.1% and 2.2% during the previous two weeks. In total, that brought inflation during the first 21 days of the war to 6.4%, compared with 0.8% in the 21 days preceding it. At the wartime rate, consumer prices would triple every year.
Surging demand and tightening supply have both played a role. As war broke out, fearful Russians stocked up on staple foods like sugar, flour and buckwheat. NielsenIQ, a research firm, estimates that between February 21st and March 6th retail sales of sugar, cereals and other non-perishable goods rose by 46% compared with a year earlier. Such panic buying, driven by viral photos of shoppers fighting over groceries, has led to shortages of what the government deems “socially important goods”.
So long as Western sanctions remain in place, an even bigger driver of inflation is likely to be the difficulty of acquiring goods that Russia does not produce at home. In addition, whatever the country does import in spite of sanctions has become more expensive, because the rouble has lost nearly a third of its value against the dollar. Since the war began, official statistics show that the prices of smartphones have jumped by 18%, those of foreign cars by 27% and those of televisions by 33%.
The government has tried to stabilise the rouble by requiring exporters to sell 80% of their foreign currency within three days of obtaining it. The Central Bank of Russia has also begun buying the country’s sovereign debt, and raised its benchmark interest rate to 20%. Yet in its statement listing the causes of this “temporary but inevitable period of increased inflation”, the bank omitted the shortages of imported goods caused by Western sanctions.
would shrink by 8% and inflation would come to 20%. With total price increases already at 8% this year, meeting this forecast would require inflation for the rest of 2022 to fall to one-seventh of its current level.This article appeared in the Graphic detail section of the print edition under the headline "Starting to bite"
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