Russia's annual inflation rate exceeded 10% in February and reached its highest level in two years, despite the central bank's aggressive interest rate hikes.

This is according to official data, AFP reports.

Prices across the Russian economy have been rising rapidly for months, spurred by huge state spending on the conflict in Ukraine.

Annual inflation rose to 10.1 percent last month compared with 9.9 percent in January, according to the statistics service Rosstat.

That's the highest since February 2023.

The central bank raised interest rates to a two-year high of 21% in October. That made borrowing more expensive for consumers.

Economists warn, however, that raising interest rates has a limited effect against inflation driven by government spending.

Since launching its offensive in Ukraine, Moscow has increased military spending to levels not seen since the Soviet era, producing missiles and drones and paying lucrative salaries to the hundreds of thousands of soldiers on the front.

Last month, the central bank sharply raised its inflation forecast for 2025. It warned that there was no sign that the rapid rise in prices would reverse.

Inflation is now expected to average between 7 and 8 percent this year, compared with an earlier forecast for 2025 of between 4.5 and 5 percent, the central bank said. | BGNES