Challenges of the Russian economy: Inflation and interest rate policy in focus

The difficulties facing Vladimir Putin are increasing. Recent developments in the Russian Business paint a bleak picture for the future of the country. The Ukraine war and the rising inflation put pressure on the Russian Central Bank to take drastic measures to stabilize the situation.

Challenges for Putin’s government

Inflation is reaching alarming levels, with experts predicting it will be well above the target of four percent by the end of 2024. In light of this development, the central bank is planning a sharp interest rate hike to 18 percent to counter stubborn inflation. This measure will be felt by borrowers as the cost of money in the economy is expected to continue to rise.

Consequences of sanctions for the Russian economy

The recent sanctions have further aggravated the economic situation in Russia. The country's financial sector is suffering from the restrictive measures aimed at reducing Putin's financial resources. It remains questionable how long the Russian economy can absorb the impact of the sanctions, as the country's revenue sources are shrinking and exports are being affected.

Future prospects for Russia

The uncertain economic situation in Russia requires urgent action to contain inflation and cushion the impact of sanctions. Putin faces the challenge of keeping the country's economy on track and maintaining the confidence of investors and lenders. The next few months will be crucial to see how Russia deals with these difficult challenges.

Source: Material from Reuters, edited by Bona Hyun