Russian inflation touches one-year high in February on service prices

A honour guard soldier holds a rifle with a Russian flag mounted on a gun's bayonet at the monument of the Heroic Defenders of Leningrad in St.Petersburg on 27 January 2024.
A honour guard soldier holds a rifle with a Russian flag mounted on a gun's bayonet at the monument of the Heroic Defenders of Leningrad in St.Petersburg on 27 January 2024. Copyright Dmitri Lovetsky/Copyright 2024 The AP. All rights reserved
By Indrabati Lahiri
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Russian inflation in February was mostly boosted by increases in services and non-food product inflation.

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Russia's year-on-year inflation rate for February climbed to a one-year high of 7.7%, hovering above analyst expectations of 7.6%

The figures published by the Russian Federal State Statistics Service on Wednesday were quite a step up from January’s 7.4%. It was also almost double the 4% target set by Russia’s central bank.

Additionally, core inflation touched a one-year high in February, at 7.6%, up from 6.8% in January. Month-on-month inflation stabilised slightly, clocking in at 0.7% in February, down from 0.9% in January.

The escalation in year-on-year prices was mainly due to services price inflation, which inched up 8.5%, from 8.1% in the previous month. Inflation for non-food products also rose 6.6%, from 6.2% in January. However, food price inflation stayed stable at 8.1%.

However, when it came to month-on-month prices, food inflation decreased to 0.8% from 1.3% in January, whereas non-food product inflation slowed to 0.3%, down from 0.5% in the previous month. On the other hand, month-on-month services inflation was also high, at 1.1% in February, up from 0.8% in January.

Why is Russian inflation soaring?

Russian inflation has spiked in the past few months, due to the continued effects of international sanctions on everyday prices in the country. 

A slew of sanctions, in response to the country’s ongoing aggression in Ukraine, has meant that Russia now faces significantly reduced options regarding international trade and the procurement of several goods.

It also means that importing certain goods has now become much more cumbersome, time-consuming and expensive, which in turn, results in higher prices for consumers.

Russia is also continuing to spend massively on military and defence operations, to continue funding the Ukraine war. This includes things such as weapons, transportation equipment and soldier salaries, amongst other expenses.

The Central Bank of the Russian Federation has also raised interest rates considerably in the past few months, with the current rate being 16%. This has gone a long way in devaluing the rouble, especially regarding the US dollar, which has led to imports becoming even more expensive.

International sanctions have mostly impacted Russia’s top income-generating sectors, such as oil and gas and metals and mining. 

Most recently, sanctions from the UK and EU have intensified, as the Russia-Ukraine war has crossed its second anniversary. The death of Russian opposition leader Alexei Navalny in an Arctic prison colony has also resulted in more stringent sanctions on the country.

Although it would appear that the Russian economy is still quite resilient in the face of these sanctions, due to its gross domestic product growth, most of this is because of inflated military spending. More often than not, this increase in war spending comes at the cost of improving living conditions for Russian citizens.

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