Russia's inflation surges as Central Bank faces political pressure

According to the Resurgam Telegram channel, inflation in Russia for 2024 officially reached 9.52% by year-end, which was significantly higher than the Central Bank's revised forecast of 7.42%. While 9.52% may seem high, this figure does not account for several key factors that suggest the true inflation rate is much higher:

1. The level of the key interest rate in Russia.
2. These figures represent only official data, and many economists, both within Russia and internationally, argue that the real inflation rate is considerably higher. The only question remains: by how much.
3. Comparing inflation in Russia to Ukraine is misleading, as the size of the economy impacts inflation's significance. Larger economies, like Russia's, require more resources to maintain stability, and inflation has a more critical effect on macroeconomic stability.

Looking ahead, early data for 2025 shows inflation at 0.67% for the first 13 days of January, which translates to an estimated 16.9% annual inflation at a constant rate. This is far above the Central Bank's goal of 5.6% inflation for 2025 and a return to 4% in 2026.

“The current inflation surge reaffirms that the Central Bank’s decision to maintain a 23% key rate in December was likely influenced not by economic considerations, but by political pressure from Putin’s oligarchic circle. The central bank's statements about ‘cooling the economy’ appeared to be a public excuse,” the author points out.

The Resurgam channel suggests monitoring the situation closely in February when the Central Bank of Russia will once again face the decision of whether to raise the key rate. If the rate is increased to 23%, it could help control inflation. However, if political pressure causes the central bank to reverse its decision, the situation could worsen.