Higher oil prices carry a sting in the tail for Russia — resurgent inflation
Higher oil prices due to the Middle East conflict are boosting Russia's revenue but also reigniting inflation, complicating the central bank's efforts to stabilize the economy. Rising costs are affecting the wider economy, with inflation expectations increasing among Russian households.
Russia is experiencing a short-term revenue boost due to higher oil prices caused by the Middle East conflict. However, this is accompanied by rising inflation, which complicates the central bank's efforts to stabilize the wartime economy. Oil prices jumped from $70 per barrel to over $100 after the conflict escalated, and although they have fallen back below $100, they remain 50% higher than before. Inflation in Russia accelerated to 5.95% in the first week of April, after a dip to 5.86% in March. The central bank had lowered its benchmark interest rate in late March, but may now delay or reverse this decision due to inflationary pressures. Russian households are already feeling the pressure, with inflation expectations rising to 13.4% in March, the highest since August.
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