Starting today:
For comparison, here is the y/y (official) inflation rate (through June).
With the policy rate at 18%, and year-over-year inflation at 8.6% (as of June), we actually have a contractionary monetary policy. The actual posting rate was 7.4% in June. Taking into account conservative expectations, the real ex-ante rate for August onwards is around 9.4%…(The Central Bank of Russia is projecting 9% inflation in July).
The combination of an overly expansionary monetary policy (with an emphasis on military industries) and supply shocks (restrictions on key inputs, immigration, conscription) required tighter monetary policy to keep inflation under control.
For more on the extent to which Russia is now running a military economy, see BOFIT’s Heli Simola “Military rule increases inequality in Russian economy” (May 2024). Two graphs:
See also my non-military economic growth estimates, here.
It will be interesting to me to see how long the economy can withstand 9% or real rates without a recession (or without the government firing the governor of the Central Bank).
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