Russia's central bank has taken a significant step by raising its key interest rate to a record-high of 21% in an attempt to combat rising inflation. The decision comes amidst substantial government spending on the military due to the ongoing conflict in Ukraine, which has strained the economy's capacity to produce goods and services and led to an increase in workers' wages.
The central bank highlighted that domestic demand is surpassing the ability to expand the supply of goods and services, resulting in inflation running well above the bank's previous forecast. Inflation expectations are also on the rise, prompting the possibility of further rate hikes in December.
