Bloomberg News

Russian Inflation Set to Accelerate as Food Prices Rise

July 03, 2012

Russian inflation probably quickened last month from a record low to the fastest pace since January as food costs increased, a survey of economists showed.

Consumer prices rose 4 percent from a year earlier, compared with a 3.6 percent advance the previous month, according to the median of 16 estimates in a Bloomberg survey. Prices increased 0.6 percent from May, a second poll showed. The Moscow-based Federal Statistics Service will report the data today or tomorrow.

The inflation rate in the world’s largest energy exporter has held at 3.6 percent in April and May, the lowest since the collapse of the Soviet Union, after the government delayed annual utility-tariff increases for six months. That trend may reverse as hot weather reduces crop yields and drives food prices higher, according to Piotr Matys, an emerging-markets analyst at 4Cast Ltd. in London.

“June will be a turning point as inflation’s going to resume an upward trend,” Matys said yesterday in a telephone interview. “Food has been the main cooling factor behind Russia’s consumer-price index in previous months and the central bank warned us that this positive factor is going to fade.”

The Micex Index (INDEXCF) rose 2.5 percent to 1,437.45 by the close in Moscow, the strongest level since May 3. It has risen 2.6 percent in 2012. The ruble strengthened 1.4 percent to 32.1500 per dollar, the highest level since May 28, after weakening 9.2 percent in the second quarter.

Grain Crop

Food costs, which account for 30 percent of the consumer price index, have risen at a slower pace over the last year after a strong harvest. Russia’s grain crop will fall to between 80.5 million and 85 million tons in the 2012-13 season from 94 million tons the previous year, Andrei Sizov Jr., managing director of Moscow’s SovEcon research center, said yesterday.

The central bank has left its benchmark interest rate unchanged since December even as monetary-policy makers in developed and emerging nations reduce borrowing costs to stimulate their economies. Price growth will pick up in the second half of 2012 as the effects of food disinflation disappear and utility prices rise, the regulator said June 15.

Bank Rossii still predicts full-year inflation of 5 percent to 6 percent, compared with about 4 percent now, Deputy Chairman Sergey Shvetsov told reporters in Moscow yesterday.

“We have every reason to believe that when the July factor feeds through, we’ll reach the target range,” he said. “The harvest has been fairly normal, so we’re sure we’ll finish the year within the target range.”

To contact the reporter on this story: Scott Rose in Moscow at rrose10@bloomberg.net

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


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