Over 4 percentage points above the inflation target: Russia's soaring inflation fueled by war spending

In May, Russia's inflation rate accelerated again. The Moscow Times points out that, according to officials, the economy is overheating due to increased spending on the war in Ukraine.

The Russian statistical agency Rosstat reported on Friday that in May 2024, inflation in Russia was 8.3 percent year over year, the highest level since February 2023.

In April 2024, the agency reported a price increase of 7.8 percent year over year. The latest data significantly exceeds Russia's inflation target of 4 percentage points.

"The Moscow Times" reports that, according to Russian officials, the increase in government spending has supported the economy in the face of Western sanctions. Still, it has also led to a sharp rise in prices and labor shortages in many sectors unrelated to the conflict in Ukraine.

Furthermore, the rapid price increase has pressured the Russian central bank to continue raising interest rates to control inflation.

Last week, the bank maintained its main interest rate at 16 percent but signaled that it might raise borrowing costs in the future if the rate of price increases does not slow down.

German Gref, president of the state-owned Sberbank, warned last week that economic growth in Russia is "fragile" because it is based on government spending, which drives up wages and consumer spending, rather than investments or productivity growth.