The pace of inflation in Russia accelerated further in May, as officials warn that huge government spending to support the military offensive against Ukraine is causing the economy to overheat.
The increase in government spending has propped up the Russian economy in the face of a barrage of Western sanctions, but also triggered soaring prices and labor shortages in many sectors not directly linked to that spending.
7.8% one month earlier
Annual inflation rose to 8.3% at the end of May compared to 7.8% a month earlier, the country’s official statistics agency said on Friday. This is the highest level since February 2023, far above the official target of 4%. The rapid rise in prices has put pressure on the country’s central bank to further raise interest rates to control inflation.
Last week, the latter maintained its key rate at 16%, but signaled that it could raise it in the future if the pace of price increases does not slow down. German Gref, the CEO of Sberbank, warned last week that Russia’s growth was “fragile” because it depended on public spending to continue to increase wages and consumer spending, and not on investment or productivity gains.
