Russian central bank hikes key rate to fight inflation

MOSCOW, July 26 (AFP): Russia's central bank raised its key interest to 18 per cent on Friday, the sixth hike in just over a year as it seeks to tame soaring price rises.

Governor Elvira Nabiu-llina said Russian businesses were facing higher costs and payment problems as the West puts pressure on Russia's trading partners to stop helping it circumvent sanctions.

Domestic prices have risen fast since Moscow launched its full-scale military offensive against Ukraine in February 2022, as massive government spending and skyrocketing wages have pushed up demand across the economy.

"Inflation has accelerated and is running substantially above the Bank of Russia's April forecast," the regulator said in a statement.

"The growth of domestic demand continues to significantly outpace the ability to expand the supply of goods and services. In order for inflation to begin to decline again, additional tightening of monetary policy is required," it added.

The interest rate was previously at 16 per cent and Nabiullina kept open the possibility of further hikes.

Nabiullina said the economy was showing stubborn signs of "overheating" and pointed to trading difficulties as another factor driving up inflation.

"The risks of secondary sanctions have indeed increased. We see this in the difficult situation with payments," she said.