Russia raises key interest rate to 21% to tackle rising inflation

Russia's central bank has raised its key interest rate by two percentage points to a record 21% to combat rising inflation. This increase aims to address inflation driven by high military spending amid the ongoing conflict in Ukraine. The central bank noted that domestic demand is outpacing the economy's ability to supply goods and services. Inflation is significantly above previous forecasts, prompting the bank to consider further rate hikes in December. Despite the high interest rate, Russia's economy grew by 4.4% in the second quarter of 2024, supported by strong oil export revenues. However, the central bank warns that continued high military spending could lead to economic imbalances.