Russian Central Bank Hikes Rates       09/13 06:19

   

   MOSCOW (AP) -- Russia's central bank raised its key interest rate by a full 
percentage point to 19% to combat high inflation as government spending on the 
military strains the economy's capacity to produce goods and services and 
drives up workers' wages.

   The central bank said in a statement Friday that "growth in domestic demand 
is still significantly outstripping the capabilities to expand the supply of 
goods and services." It held out the prospect of more rate increases to return 
inflation from the current 9.1% to the bank's target of 4% in 2025.

   Russia's economy continues to show solid growth as a result of continuing 
oil export revenues and government spending on goods, including for the 
military. One result is inflation, which the central bank has tried to combat 
with higher rates that make it more expensive to borrow and spend on goods, in 
theory relieving pressure on prices.