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Russia hikes interest rates to 15% as inflation soars

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The Central Bank of Russia has raised its key interest rate to 15% in an effort to tackle inflation and support the struggling rouble, marking the fourth consecutive increase. The unexpected two-percentage-point hike was prompted by the persistently high global inflation rates, partly triggered by Russia’s military intervention in Ukraine, which has led to a 6% inflation rate in Russia as of September.

The country has been experiencing escalated government spending directed towards its military efforts, contributing to the recent inflationary pressures. With the latest hike, the Bank of Russia has cumulatively raised the rates by 7.5 percentage points since July, aiming to stabilize inflation at the targeted 4% level. The decision for the emergency rate hike in August was prompted by the rouble’s decline, which fell below 100 against the US dollar, necessitating a tighter monetary policy.

The global supply chain disruptions during the pandemic, coupled with the repercussions of Russia’s invasion of Ukraine, have notably impacted food and energy prices, driving the overall inflation up. Additionally, the imposition of Western sanctions on Russia in response to its actions in Ukraine has had adverse effects on the country’s economy, causing a significant depreciation of the rouble. The sanctions have led to constraints on Russia’s trade, with several European countries seeking alternative energy suppliers and implementing measures to limit Russia’s oil export earnings.

Despite the successive rate hikes, there are concerns that Russia may encounter challenges in attracting foreign investment due to the ongoing sanctions. The exclusion of Russia from the Swift international payment system has further added to the economic strain. Nonetheless, the European Commission has affirmed that the sanctions are effective in exerting pressure on Russia.

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France bans short-haul flights to cut carbon emissions

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The French government has implemented a ban on domestic short-haul flights in situations where there are train alternatives available, as part of its efforts to reduce carbon emissions. This law took effect two years after lawmakers initially voted to end routes where the same journey could be completed by train within two-and-a-half hours. As a result, air travel between cities like Paris, Nantes, Lyon, and Bordeaux will be largely prohibited, while connecting flights are not affected by the ban.

Critics of the measure have referred to it as merely a symbolic gesture. Laurent Donceel, the interim head of the industry group Airlines for Europe (A4E), expressed his belief that these bans would only have minimal effects on reducing CO2 emissions. He suggested that governments should instead focus on supporting more substantial and practical solutions to address the issue.

The global airline industry has already experienced significant setbacks due to the COVID-19 pandemic, with the number of flights in 2020 decreasing by almost 42% compared to 2019, as reported by Flightradar24.

Initially, France’s Citizens’ Convention on Climate, formed by President Emmanuel Macron in 2019 and consisting of 150 members of the public, proposed eliminating plane journeys where train alternatives of under four hours were available. However, this limit was reduced to two-and-a-half hours following objections from certain regions and the airline Air France-KLM.

French consumer group UFC-Que Choisir had previously urged lawmakers to maintain the four-hour limit, highlighting that planes emit 77 times more CO2 per passenger than trains on these routes, despite trains being cheaper and the time difference being only 40 minutes. The group also called for safeguards to prevent the French national railway company, SNCF, from raising prices artificially or diminishing the quality of rail services.

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