Russia Struggles to Contain Resurgent Inflation

livemint.com:

Inflation in the West has passed its peak. But in Russia, price rises have gained a second wind, bedeviled authorities and brought the consequences of Moscow’s war in Ukraine closer to home. The increase in prices for food and other basic goods has accelerated and some Russians have abandoned vacations abroad.

At the start of the new school year, parents faced a huge jump in the cost of uniforms, with some clothes factories reoriented toward the military. More than half of Russian smokers, meanwhile, have looked to switch to cheaper counterfeit products, according to Russian pollster Romir. To stifle the rising prices, the Russian central bank on Friday is expected to lift its key interest rate from the current level of 12%.

It follows a big rate increase in August to stem a sharp selloff in the ruble. A toxic mix of a sliding currency, booming military spending and an intractable labor shortage has fueled price rises in recent months. Russia suffered a bout of high inflation after the West imposed a raft of sanctions early last year, but prices then cooled temporarily.

The return of inflation is a major worry for the government, which has sought to shield the domestic population from the impact of sanctions. Russia’s economy has defied the gloomiest expectations thanks to massive government spending and the Kremlin’s ability to find new trade partners. But Moscow is increasingly struggling to keep the economy humming without fueling imbalances and inflation, a dilemma that is becoming more urgent as the Kremlin gears up for the March presidential election.