IN DECEMBER Vladimir Putin, Russia’s president, said that inflation was “the main problem” for Russia’s economy and citizens. Today, the country’s greatest woe is its invasion of Ukraine, in which thousands of soldiers have already died. But inflation has not gone away. On the contrary, the war has sped it up to levels not seen since Russia’s financial crisis of 1998.

On March 23rd the government announced that consumer prices rose by 1.9% in the seven days to March 18th, following increases of 2.1% and 2.2% during the previous two weeks. In total, that brought inflation during the first 21 days of the war to 6.4%, compared with 0.8% in the 21 days preceding it. At the wartime rate, consumer prices would triple every year. Moreover, the inflation index assigns hefty weights to the prices of heating and petrol, which have been flat for weeks. Had they risen in line with the cost of fuel in global markets, inflation would have been even higher.

Surging demand and tightening supply have both played a role. As war broke out, fearful Russians stocked up on staple foods like sugar, flour and buckwheat. NielsenIQ, a research firm, estimates that between February 21st and March 6th retail sales of sugar, cereals and other non-perishable goods rose by 46% compared with a year earlier. Such panic buying, driven by viral photos of shoppers fighting over groceries, has led to shortages of what the government deems “socially important goods”.

So long as Western sanctions remain in place, an even bigger driver of inflation is likely to be the difficulty of acquiring goods that Russia does not produce at home. In addition, whatever the country does import in spite of sanctions has become more expensive, because the rouble has lost nearly a third of its value against the dollar. Since the war began, official statistics show that the prices of smartphones have jumped by 18%, those of foreign cars by 27% and those of televisions by 33%. Given the government’s deluge of false propaganda about its war, scepticism might be warranted about its economic statistics. However, independent estimates by PriceStats, an American firm that tracks prices of items sold online, actually show slightly less inflation, suggesting that Russia is not tampering with the data.

The government has tried to stabilise the rouble by requiring exporters to sell 80% of their foreign currency within three days of obtaining it. The Central Bank of Russia (CBR) has also begun buying the country’s sovereign debt, and raised its benchmark interest rate to 20%. Yet in its statement listing the causes of this “temporary but inevitable period of increased inflation”, the bank omitted the shortages of imported goods caused by Western sanctions. Getting those sanctions lifted would almost certainly require ending the war—a decision that rests with Mr Putin, not monetary policymakers.

The CBR surveyed economic analysts in early March. On average, they predicted that in 2022 Russia’s GDP would shrink by 8% and inflation would come to 20%. With total price increases already at 8% this year, meeting this forecast would require inflation for the rest of 2022 to fall to one-seventh of its current level. ■

Sources: Rosstat; State Street Global Markets, PriceStats; The Economist