Russia could be secretly facing an astonishing inflation rate say top economist

Russian inflation could be raging out of control behind the facade of Moscow’s carefully crafted economic numbers according to one top American economist who isn’t buying the Kremlin’s official inflation rate figures.

Steve Hanke is a Professor of Applied Economics at John Hopkins University as well as a Senior Fellow at the Independent Institute, and he believes the inflation rate numbers coming out of Russia are off by a huge margin. 

According to Hanke’s estimates, Russia could be experiencing an annual inflation rate of as much as 60 percent, a number far above the official estimations being provided by the Kremlin—numbers that don’t reflect the serious economic issues facing Moscow.

Photo Credit: Wiki Commons

“Today, using high-frequency data, I measure Russia's inflation at 60%/yr, ~18.5x the official (read: phony) rate. Rosstat is putting out official numbers that are way behind the curve,” Hanke tweeted on July 25th referring to numbers by Russia’s statistics service.

Photo Credit: Twitter @steve_hanke 

Hanke has been following Russian inflation as part of an ongoing series that calculates the current inflation rates in some of the world’s most economically challenged countries and Russia has been making its way up the economist's charts for months.

On July 23rd, Hanke tweeted that the Russian ruble was in freefall while inflation in the country was raging, reminding his audience that in June he had calculated the Russian inflation rate to be roughly 50%. But what are the Russians saying about inflation?

Bringing inflation numbers down has been a goal for most countries around the world ever since things started to get a little crazy during the global pandemic. But Russia, it seems, has faired surprisingly well considering it's fighting a crippling war in Ukraine. 

The Central Bank of the Russian Federation’s most recent report on the country’s rate of inflation went hand-in-hand with a raising of Russia’s interest rate by 100 basis points after it was reported that inflation is exceeding Moscow’s 4% target. 

“Current price growth rates, including a variety of underlying indicators, have exceeded 4% in annualized terms and are still on the rise,” the bank director’s report read, which was just a complicated way of saying the country’s inflation rate was still too high. 

The 100 basis point rise put Russian interest rates at 8.50% and the move was mostly done to counteract the pro-inflationary risks the country faces from the ruble's continued devolution, a situation Russia’s Central Bank said would continue to dictate its policy.

The Russian Central Bank’s directors also noted in their July 21st report that the bank would continue to monitor the situation and had plans in place to push interest rates higher in order to stabilize the country’s inflation at 4% in 2024 into the future. 

Inflation rates reaching between 5.0% and 6.5% are expected for 2023, numbers that are a far cry from what Hanke has predicted is going on behind the scenes in Russia. 

The picture painted by official Russian sources does seem a bit too good considering all the challenges Russia is facing and there are indications things could be bad inside of the country as its workforce disappears into the military and capital continues to leave. 

The Telgeaph’s Melissa Lawford noted July 24th article on Russia’s crumbling fortunes that the country’s cash reserves were dwindling, its oil revenue falling, its workforce was fighting at the front, and foreign investment all but dried up while the ruble was crashing. 

“The situation is changing quite rapidly and in the negative direction,” explained Oksana Antoneko, geopolitical risk advisor for the London-based think tank Chatham House, to The Telegraph. 

“At the end of this year, it is very clear that Russia will be in a much worse macroeconomic situation than it was last year, and this is going to be a sustained trend,” Antoneko continued. 

How inflation in Russia will develop over the coming weeks and months has yet to be seen, but it is likely things are only going to get worse for Moscow as it continues to commit itself to winning a war that has proven so disastrous for nearly all involved.