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Russia annual inflation jumps to 11.4% as rouble falls

rouble notes Image copyright Reuters

Russia's annual inflation for 2014 will hit about 11.4%, according to initial estimates, driven higher by the plunging value of the rouble.

The currency's falling value has pushed up prices, particularly of food, which rose about 15.4% during the year.

The state statistics service Rosstat said that consumer prices rose 2.6% in December, a month when the rouble suffered some of its steepest falls.

Meanwhile, Russia has intervened to support another bank, Gazprombank.

In 2013, the annual inflation level was 6.5%. The 2014 inflation figure is the highest since Russia's financial crisis in 2008.

Lower oil prices and Western sanctions imposed over Ukraine have driven down the value of the rouble, meaning that the price of many goods - especially imports - have risen.

Rosstat said that the price of non-food products rose by 8.1% during 2014, while service charges went up by 10.5%.

Rosstat is due to publish final inflation data on 12 January.

Russia's economy shrank in November for the first time in five years, and is expected to enter recession in the first quarter of 2015.

Bank intervention

A fall in the price of oil has cut revenues earned by the government, while sanctions imposed over Russia's actions in Ukraine have hit the banking sector by cutting off foreign lending.

On Wednesday, the government bought almost 41bn roubles (£437m; $683m) worth of state bank Gazprombank's shares as part of the support plan.

The cash injection helps the "bank to strengthen its capital structure and provides for sufficient scope to expand its operations", Gazprombank said in a statement.

On Tuesday, VTB, Russia's second largest bank, said it had received 100bn roubles ( £1bn; $1.8bn) from the country's national welfare fund, part of a scheme to recapitalise the banking system.

And last week, Moscow significantly scaled up rescue funds for Trust Bank, saying it would get up to $2.4bn in loans to bail it out.

Russia's President Vladimir Putin said early this month that domestic banks should be supported to boost lending to important projects in the real sector of the economy.

"We have a large amount of internal savings, they should become effective investments," he said in his annual state of the union speech.

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