Russian central bank chief hints at rate hike

MOSCOW - Russia will consider raising interest rates before the end of the year, the head of the central bank said Wednesday, as Moscow grapples with high inflation and a falling currency.

Moscow has taken rates to a two-decade high of 21% as it battles to stem the economic fallout from its military offensive on Ukraine and barrage of Western sanctions.

Inflation is running at more than twice the government's 4% target, and central bank Governor Elvira Nabiullina warned that it might not reach that level until 2026.

"We have signalled that the central bank allows for the possibility of a rate hike," Nabiullina said at an investment forum in Moscow.

"We need to bring inflation down and inflation has not started to slow down," she added.

Analysts expect the central bank will raise rates to 22% or 23% at a meeting on December 20.

But Nabiullina said a rate rise was not guaranteed and said she saw signs of a slowdown in lending, which could help cool Russia's overheating economy.

Russia has massively ramped up military spending on its Ukraine offensive -- expenditure that has helped the economy defy predictions of a lengthy recession, but also led to deep labour shortages and high inflation.

Nabiullina called interest rates a "powerful instrument for the fight with inflation".

But economists say that because inflation is being driven by record state spending on the Ukraine conflict, higher borrowing costs have less of an impact on reining in price rises than in a more market-based economy.