Inflation has jumped to 5.8% in Russia for March, doubling from just 3% in May last year.
Food and vegetable prices have risen by as much as 12% over last year, with the Russian Ruble (RUB) also falling from 72 to the dollar last month to now 77.
This has led the central bank there to increase rates to 4.5% from 4.25%, but it is finding some political resistance with the Economic Development Minister Maxim Reshetnikov stating according to a rough translation:
“We understand that [it is impossible] to fight inflation, which is non-monetary in nature, with only one rate, because we talk a lot about the fact that this inflation by and large is imported from the world food markets… But if we go following this path, the price will be a reduction in investment lending in the economy.”
In China producer prices have also risen 4.4% year-over-year, the most since mid-2018, while commodity prices have surged.
Part of this is due to the stronger than expected economic recovery, with the Bank of Russia First Deputy Governor Ksenia Yudaeva stating:
“Inflation risks are quite substantial and they are not only driven by external inflation, but also by domestic inflation.”
The question is just how much further inflation is going to rise for Russia, which in 2015 saw an inflation rate of as much as 17%.
Their economy moreover sharply contracted last year and has seen anemic growth for much of the past decade at 1% to 2%, considerably lower than even for the United States let alone developing economies which are currently growing at 5% to 10% like Turkey.
This combination of high inflation and low growth may be partially why a fairly significant crypto ecosystem has developed there, with its own crypto media.
Their government has been somewhat hands off, especially after ethereum’s co-founder Vitalik Buterin met Russia’s President Vladimir Putin in June 2017.
So an expectation of more inflation in addition to the falling value of rubles may lead more Russians to adopt bitcoin as a global hedge and digital gold finite money.