Bloomberg News

Russian Inflation Slows to Post-Soviet Record of 4.2%

February 07, 2012

(Updates with economist quote in fourth paragraph)

Feb. 6 (Bloomberg) -- Russia’s inflation decelerated in January to the slowest annual rate since the Soviet Union collapsed two decades ago as food costs eased and the government delayed increases in utility tariffs.

Inflation was 4.2 percent from a year earlier, down from 6.1 percent in December, the Federal Statistics Service in Moscow said in an e-mailed statement today. Prices rose 0.5 percent from a month earlier. Economists forecast increases of 4.3 percent and 0.6 percent, two surveys showed.

Russia’s central bank last week refrained from cutting interest rates after a surprise reduction in December, noting the “temporary nature” of the price slowdown and signaling for the first time since August that borrowing costs may remain unchanged in the “coming months.” Prime Minister Vladimir Putin froze the tariffs until mid-year to solidify his chances for retaking the Kremlin in presidential elections next month, said Vladimir Tikhomirov, chief economist at Moscow-based Otkritie Financial Corp.

“The delay is a political decision linked with the electoral cycle to a large extent,” Tikhomirov said by phone. Price growth will start to accelerate this summer and may reach 6 percent by year-end, he said.

Central bank Chairman Sergey Ignatiev wants to trim the inflation rate to about 5 percent to 6 percent in 2012 from 6.1 percent last year. Prices and poverty are seen as the biggest threats facing the country this year, according to a Jan. 31 poll by the independent Levada Center.

--With assistance from Zoya Shilova and Rinat Gaynullin in Moscow. Editors: Paul Abelsky, Andrew Atkinson

To contact the reporter on this story: Stepan Kravchenko in Moscow at skravchenko@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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