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Russia’s inflation shock gives way to shortages

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(Bloomberg Opinion) — Russian inflation has inched up slightly from a multi-decade high, but there are signs that food staples and imported goods are becoming scarcer in the wake of international sanctions over the invasion of Ukraine.

Consumer prices rose 2.09% in the seven days ending March 11, down from 2.22% a week earlier, the Federal Statistics Service said on Wednesday. Russia may be headed for “Soviet-style inflation,” which manifests itself not in higher costs but through a shortfall in goods, according to Alexander Abramov, a financial markets specialist at RANEPA, a state university in Moscow.

“The main risk now is that there is a shortage of imported basic goods every day, as well as durable goods,” he said. “Many are no longer available in stores and prices in online stores have reached considerable.”

The ruble’s collapse, coupled with the impact of sanctions, is keeping inflation near levels not seen in Russia since the government’s debt default in 1998. Consumers have rushed to purchases in recent days in anticipation of further price increases. The exodus of international companies intensifies fears of shortages.

The Bank of Russia raised interest rates to 20% and imposed capital controls to support the ruble. He is scheduled to review monetary policy at a meeting on Friday.

“Tight monetary conditions are helping inflation ease but will not prevent it from reaching 20% ​​this year in conditions of shortfalls in certain products and a sizeable fall in the ruble,” Raiffeisen Bank analysts said in a note to clients.

original note:

Russia’s inflationary shock is giving way to Soviet-style shortages

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