Bloomberg News

Russian Inflation Quickens to 5.9% in August, Below Forecast

September 04, 2012

Russia’s inflation accelerated in August to near the upper limit of the central bank’s target as food prices grew after a three-month drought seared millions of hectares of cropland and pasture.

Consumer prices rose 5.9 percent from a year earlier, the highest level since December, from 5.6 percent in July, the Federal Statistics Service in Moscow said today in an e-mailed statement. The median estimate of 14 economists in a Bloomberg survey was for 6 percent. Prices grew 0.1 percent from a month earlier, less than the 0.2 forecast in a separate poll.

Breaching the 6 percent inflation target may force the hand of policy makers in Russia, the last major emerging economy to keep borrowing costs unchanged this year. A drought since May has curbed production and affected 5.99 million hectares (14.8 million acres) of plantings in 22 of Russia’s 83 regions, with 20 of them declaring an emergency.

“August’s data suggest that supply-side price pressures continue mounting on the back of rising food and commodity prices, which is at least partially being passed on by producers to consumers,” Johannesburg-based Tradition Analytics said in an e-mailed research note. “There is scope for CPI growth to continue edging higher.”

The ruble is the fourth-worst performer of 25 emerging- market currencies tracked by Bloomberg over the past six months. The ruble strengthened 0.6 percent to 32.1726 per dollar at 4:44 p.m. in Moscow. Non-deliverable forwards, which provide a guide to expectations of currency movements, showed the ruble at 32.6283 per dollar in three months.

Grain Crop

Russia, the world’s third-largest wheat exporter last season, cut its grain crop estimate Aug. 31 to between 70 million and 75 million metric tons, down from 94.2 million tons in 2011. Deputy Prime Minister Arkady Dvorkovich said the government won’t restrict grain exports this year.

Food costs, with a 38 percent weighting in the Russian consumer-price basket, may stoke inflation further by adding 2 percentage points in the September-March period, Julia Tsepliaeva, head of research at BNP Paribas (BNP) in Moscow, said in an e-mailed note. Wheat futures have climbed more than 30 percent this year on concern dry weather in Russia and the worst U.S. drought since 1956 will curb global grain supplies.

Inflation Target

Bank Rossii has sought to hold inflation at 5 percent to 6 percent this year after bringing price growth to a record-low 6.1 percent in 2011. The Economy Ministry last week raised the inflation forecast for this year to 7 percent from between 5 percent and 6 percent. The central bank has held its refinancing rate at 8 percent, a quarter-point above the record low, since December.

Core inflation, which excludes volatile costs such as energy, accelerated to 0.6 percent in August from a month earlier, more than the 0.5 percent median forecast of nine economists in a Bloomberg survey.

“Breaking through the 6 percent threshold is only a matter of time,” Dmitry Polevoy, chief economist at ING Groep NV, said by e-mail before the release. “Everyone but the central bank has already said making 6 percent inflation this year isn’t realistic, including the Economy Ministry. The sooner it does that and explains its position to the market, the better.”

To contact the reporters on this story: Milda Seputyte in Vilnius at mseputyte@bloomberg.net; 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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