Russian inflation slows in Sept but still elevated

Inflation ticked lower in Russia in September but was still more than double the central bank's target, as huge spending on the Ukraine conflict kept upward pressure on prices, official data showed Friday.

The annual rate of inflation was 8.63 percent in September 2024, slightly down from 9.05 percent in August but well above the central bank's target of four percent, according to data from the Rosstat state statistics agency.

Russia has spent billions of dollars on its soldiers and arms industry since sending troops into Ukraine, a spending surge that has swelled its economy but also sent prices soaring.

The Kremlin is set to boost its defence budget by almost 30 percent next year as it diverts resources to the offensive, spending more on the military than welfare and education combined.

Over the past year, the Russian central bank has aggressively raised interest rates in a bid to cool what it has warned is an unsustainable economic growth rate due to the massive increase in outlays on defence.

The offensive in Ukraine has also led to labour shortages in some sectors, as thousands of military-age men have left due to mobilisation while workers are drawn into the weapons industry.

On Wednesday, Russian President Vladimir Putin warned record low unemployment was starting to have a negative impact on the economy.

"There is a shortage of labour in the country," Putin said. "And this is already one of the factors limiting economic growth."