Russia’s central bank has raised its key interest rate by two percentage points to a record-high 21% in an effort to combat growing inflation.

Russia’s central bank on Friday raised its key interest rate by two percentage points to a record-high 21% in an effort to stem growing inflation as massive government spending on the military amid the fighting in Ukraine strains the economy’s capacity to produce goods and services and drives up workers’ wages.

  • Juice@midwest.socialEnglish
    12·
    1 month ago

    Increased interest rates make it more expensive for businesses to borrow money. This causes them to tighten up expenses to remain profitable which means cutting hours and laying people off. The more people that are unemployed, the lower wages become.

    Inflation is caused by companies raising prices in response to higher revenues. Forcing people into unemployment stops that by taking money out of circulation, it just sits in accounts as capital, rather than being used to pay wages