MOSCOW (AP) 鈥� Russia鈥檚 central bank on Friday raised its key interest rate by two percentage points to a record-high 21% in an effort to combat growing inflation as government spending on the military strains the economy鈥檚 capacity to produce goods and services and drives up workers鈥� wages.
The central bank said in a statement that 鈥済rowth in domestic demand is still significantly outstripping the capabilities to expand the supply of goods and services.鈥� Inflation, the statement said, 鈥渋s running considerably above the Bank of Russia鈥檚 July forecast,鈥� and 鈥渋nflation expectations continue to increase.鈥� It held out the prospect of more rate increases in December.
Russia鈥檚 economy continues to show growth as a result of continuing oil export revenues and government spending on goods, including for the military. One result is inflation, which the central bank has tried to combat with higher rates that make it more expensive to borrow and spend on goods, in theory relieving pressure on prices.
The Associated Press
