Russia’s central bank raises interest rate to 21%

MOSCOW: Russia’s central bank on Friday raised its key interest rate by two percentage points to a record-high 21 per cent in an effort to combat growing inflation as government spending on the military strains the economy’s capacity to produce goods and services and drives up workers’ wages.

The central bank said in a statement that “growth in domestic demand is still significantly outstripping the capabilities to expand the supply of goods

and services.”

Inflation, the statement said, “is running considerably above the Bank of Russia’s July forecast,” and “inflation expectations continue to increase.” It held out the prospect of more rate increases in December.

Russia’s economy continues to show growth as a result of continuing oil export revenues and government spending on goods.

Inflation has led the central bank to raise rates, making borrowing and spending costlier to ease

price pressures.