The Russian currency has depreciated significantly, losing 14% against the dollar, which has contributed to the ongoing inflation crisis.

Looking ahead, the Central Bank plans to assess the need for a rate increase at its next meeting in February 2025, with a forecast for inflation to decline to 4% by 2026.

Russia's military spending is bolstered by oil exports that have shifted from Europe to new markets in India and China, which do not adhere to Western sanctions.

Market expectations had anticipated a 200 basis point increase in interest rates due to persistent inflation pressures linked to military expenditures and Western sanctions.

On December 20, 2024, Russia's Central Bank decided to maintain its key interest rate at 21%, defying expectations for an increase to 22% or 23%.

The decision to hold rates steady has faced criticism from influential business leaders, who argue that high interest rates are stifling economic activity and investment.

As of mid-December, Russia's inflation rate was reported at 9.5%, significantly exceeding the central bank's target of 4%, with notable price hikes in essential food items.

Central Bank Governor Elvira Nabiullina acknowledged that while the economy is growing, demand is outpacing the expansion of economic capacity, leading to rising prices.

Some analysts suggest that the Central Bank's decision reflects political pressure, raising concerns about the independence of the regulator amid ongoing economic challenges.

The bank justified its decision by noting that credit conditions have tightened more than anticipated following an October rate hike, which raised the rate to its current level.

The depreciation of the Russian ruble has significantly increased the costs of imports, particularly cars and consumer electronics from China, exacerbating inflationary pressures.

Despite rising inflation, President Vladimir Putin projected that the economy would grow by nearly 4% this year, highlighting increases in wages and real disposable income.