Russia's central bank raises interest rates to combat inflation fuelled by military spending

The Russian central bank raised its key interest rate to 19% from 18% on Friday as the country struggles with high inflation and government military spending weighs on the economy.

Moscow's spending since Russia's large-scale invasion of Ukraine in 2022 has put pressure on the country's ability to produce goods and services and pushed up workers' wages.

A statement on Friday said that “the growth of domestic demand is still significantly greater than the scope for expanding the supply of goods and services.”

It maintained the prospect of further interest rate hikes to reduce inflation from the current 9.1 percent to the bank's target of 4 percent in 2025.

The Russian economy continues to show solid growth due to continued revenues from oil exports and government spending on goods, including the military.

One consequence of this is inflation, which the central bank tries to combat by raising interest rates in order to make loans and spending on goods more expensive – and thus theoretically reduce price pressure.

Friday's interest rate hike is the seventh in over a year.

The Russian central bank last raised interest rates in July – from 16% to 18%.