Sanctions and Scarcity: Russia's Inflation Dilemma

Russia faces climbing inflation rates in December 2024 and January 2025, attributed to Western sanctions, a weakened rouble, and a smaller harvest. The Russian central bank report highlights the economic strains amid ongoing conflict in Ukraine, with inflation predicted to surpass government forecasts.

Russia's inflation rate surged in December 2024 and January 2025, largely due to new Western sanctions, a weakened rouble, and a decrease in agricultural yields, according to a report by the Russian central bank.

The rising inflation, reaching 9.5% in 2024, poses a significant challenge for Russia's economic policy makers as they navigate the ongoing 'special military operation' in Ukraine. Price hikes in essential sectors like food and housing are fueling the increase, with inflations expected to surpass the central bank's forecast of 4.5%-5.0% for the year.

The central bank emphasized the critical need to adhere to the 2025 state budget, warning that any further economic stimulus could trigger a recession due to limited labor and production capacity. The bank's report indicates no viable option for sustained economic growth without controlling inflation.

(With inputs from agencies.)