Russian inflation and inflation drivers

Since the early 2000s, Russia has been experiencing varying levels of inflation, with rates reaching as high as 15% in recent years. Inflation in Russia is primarily driven by factors such as fluctuations in oil prices, currency devaluation, government policies, and external economic shocks.

One of the major drivers of inflation in Russia is the country’s heavy reliance on oil and gas exports. Fluctuations in global oil prices directly impact the value of the Russian ruble, leading to inflationary pressures. Additionally, geopolitical tensions and sanctions imposed on Russia have also contributed to inflation by limiting access to international markets and increasing import costs.

Government policies, such as changes in interest rates and fiscal stimulus measures, can also impact inflation in Russia. For example, the Central Bank of Russia may raise interest rates to combat inflation, which can lead to higher borrowing costs for businesses and consumers. On the other hand, fiscal stimulus measures, such as increased government spending, can stimulate economic growth but may also fuel inflation.

External economic shocks, such as the COVID-19 pandemic, can also drive inflation in Russia. The pandemic led to disruptions in supply chains, increased unemployment, and decreased consumer spending, all of which can contribute to inflationary pressures. In response, the Russian government implemented various measures to support the economy, which may have unintended consequences on inflation levels.