“Are eggs caviar?” ridicule… Concerns about inflation becoming entrenched
Base interest rate adjusted to 16% in December… Double the 7.5% in June last year
“It can be prevented through government spending, but solving inflation is not easy.”
An analysis showed that the Russian economy was facing a triple whammy as egg prices in Russia rose by more than 60% in December last year compared to the same month in 2022.
According to the Wall Street Journal (WSJ) on the 18th (local time), food prices in Russia, which has been at war for three years now, are soaring. The authorities quickly imported eggs from Turkiye, Belarus, and Azerbaijan and abolished import tariffs.
On Russian social media, there were a series of mocking posts saying, “You have to decide between eggs or caviar,” and “You should invest in eggs, not Bitcoin.”
WSJ explained that the ‘egg price surge’ was due to complex reasons. First of all, the weakening ruble increased the burden on importing feed and animal medicine. Additionally, as the number of people working in the country has decreased, there is a shortage of farm labor.
“Consumers can detect inflation by looking at egg prices,” said Tatyana Orlova of Oxford Economics, an economic advisory firm. “Such a situation could lead to entrenched inflation, which central banks are concerned about.” This is because ‘expected inflation’, which is the consumer sentiment forecast for the inflation rate, affects consumer prices.
Last year, Russia’s annual inflation rate hit 7.4%, nearly twice the central bank’s original target of 4%. The Central Bank of Russia raised the benchmark interest rate to 16% last month to curb soaring prices. This is more than double the 7.5% in June last year.
WSJ pointed out that “Russia is struggling between three problems: war financing, public dissatisfaction, and rising prices.”
Some say that it is impossible to solve all these problems. “This is a trilemma,” said Alexandra Prokopenko, a former official at the Central Bank of Russia. “Raising funds for war and alleviating public discontent can be solved through government spending, but this causes inflation and ultimately fails to achieve the goal of ‘price stability.’ “I can’t,” he said.
Economic experts predict that “egg prices will soon stabilize, but inflation will remain high.” WSJ analyzed that inflation in many countries, including the United States, is decreasing, but consumer inflation expectations are still strong.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.