After two years of interest rate cuts, Russia’s central bank has raised its key interest rate over fears of rising consumer price inflation.

The Central Bank lifted the benchmark refinancing rate to 8 per cent from record low of 7.75 per cent, in response to continued high inflation expectation.

Russia has not increased the benchmark rate since December 2008 when it was raised to 13 percent from 12 percent. The rate had remained at the 7.75 percent level for the past eight months.

Food inflation, a growing worry across the world, became especially problematic for Russia last year due to a severe drought and poor harvests – especially with respect to wheat and other staples. Food prices have jumped about 15 percent over the past year. According to BBC, the price of such staples as cereals and flour are up 70 percent from last year, fruit and vegetables are up 51 percent, and milk and dairy products are up 16 percent.

As of January 2011, the overall inflation rate was at 9.6 percent (almost double what it was last summer) -- the Russian Finance Ministry has vowed to meet the central bank's 7 percent inflation target by the end of the year.

Finance Minister Alexey Kudrin has expressed his concerns about slowing down food inflation. Thus far, he has taken some steps to do just that, including the relaxation of import duties to allow free access of food into the country, as well as the sale of grain from the state fund.