Russian inflation accelerates to 12.5%, highest since 2015

Annual inflation in Russia accelerated to 12.54% as of March 11, its highest since late 2015 and up from 10.42% a week earlier, the economy ministry said on Wednesday, with weakening rouble sending prices soaring amid unprecedented Western sanctions.

Inflation accelerated sharply as the currency fell to an all-time low and amid signs of increased demand for a wide range of goods, from food staples to cars, on expectations that their prices will rise further. Weekly inflation slowed slightly to 2.09% in the week to March 11 from 2.22% a week earlier, which was the sharpest one-week increase in prices since the 1998 crisis, data from statistics service Rosstat showed.

Prices of nearly everything from baby food to pharmaceuticals rose sharply last week, with sugar and tomato prices rising by more than 12%, Rosstat data showed. The central bank, which targets annual inflation at 4%, raised its key rate to 20% in late February.

"Tight monetary conditions facilitate inflation slowdown but, in our view, they won't save it from soaring above 20% this year," Raiffeisen Bank analysts said. The central bank will next meet on rates on Friday and is expected to keep the cost of lending unchanged.