Russian President Vladimir Putin frequently boasts about the strength of his country’s economy, claiming that Western sanctions only made it stronger (while in the same breath demanding that they be lifted).
In fact, “stagflation” — inflation combined with minimal growth — is coming to Russia. His war on Ukraine has caused both high and rising prices and labor shortages, because many workers have been mobilized or killed, while many others have fled the country.
Heading into the Central Bank of Russia’s regularly scheduled board meeting in late December, most observers expected monetary authorities to raise the policy rate from 21% to 23%. Yet the CBR kept the rate unchanged, despite an increase in the official annual inflation figure, from 8.4% to 9.5% in the space of two months. It is easy to guess what happened. Just a day before, Putin said he had spoken with CBR Chair Elvira Nabiullina, and it is safe to assume that he told her to leave the policy rate where it is. Any illusion about the CBR’s independence vanished.
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