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The Central Bank of Russia faces growing challenges from rising inflation and deepening economic contradictions, Neue Zürcher Zeitung reports.
Despite a high key interest rate of 21%, inflation reached over 9% in December, reflecting an overheated economy driven by military expenditures and limited access to capital due to international sanctions.
Defense production has ramped up, and labor shortages are intensifying wage and price increases. A weakening ruble and the high cost of imports are further fueling inflation, while capital controls deter investment.
Although economic growth reached 4% in 2024, projections for 2025 drop sharply to just 1.5%. Experts warn of impending stagflation—a troubling combination of high inflation and stagnating economic growth.
Despite these risks, the Kremlin continues to prioritize military spending, leveraging financial reserves to sustain its efforts. Analysts caution that such policies may push the economy toward a standstill in the coming year.
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