Volkswacht Bodensee - Russian inflation drops sharply in 2025

The Central Bank of Russia kept interest rates close to 20 percent for almost two years as high military spending, which initially gave a boost to the Russian economy, also spurred red-hot inflation.

But price growth slowed to about six percent last year, the Rosstat agency said.

This represents a sharp drop from the 10 percent recorded in 2024, and was also below what the central bank and analysts had expected.

In 2025, the bank started to gradually ease interest rates as price growth sagged and businesses railed against high borrowing costs which have weighed on economic growth.

Last month, Rosstat said economic growth was close to zero in the third quarter.

In November, inflation fell to about six percent from seven percent a month prior, the steepest 12-month drop in 2025, according to Rosstat.

The bank is targeting an inflation rate of four percent by 2027.

The Kremlin has raised taxes to tap the pockets of citizens and businesses to plug last year's budget gap running at around $50 billion.

In the four years of war in Ukraine, Russian defence spending has skyrocketed, while its oil and gas revenues have been weighed down by sanctions.

In 2025, Russian military spending rose by three percent over 2024, representing around seven percent of gross domestic product (GDP), the Stockholm International Peace Research Institute (SIPRI) estimated.

C.Koch--VB