Bloomberg News

Russia Inflation Probably Quickened Last Month Even as GDP Eased

December 04, 2012

Russian inflation probably quickened in November, even as the economy lost steam, because of faster growth in the cost of non-food goods.

Consumer prices advanced 6.6 percent from a year earlier after slowing unexpectedly the previous month, according to the median estimate of 20 economists surveyed by Bloomberg. Prices rose 0.5 percent from October, a second poll of 17 economists showed. The Moscow-based Federal Statistics Service will report the data today or tomorrow.

Russia, the biggest emerging economy to raise interest rates this year, is struggling to restrain price growth after droughts in the U.S. and locally drove up food costs. Policy makers want to cap inflation at 6.5 percent to 7 percent this year, according to central bank Chairman Sergei Ignatiev, and are targeting a 5 percent-6 percent rate in 2013.

While food costs have eased in recent weeks, bank lending has supported sales of non-food products, Oleg Zasov, head of the Economy Ministry’s macroeconomic forecasting department, told reporters Nov. 22.

The ruble is the second-best performer over the last three months among more than 20 emerging-market currencies tracked by Bloomberg, gaining 5.6 percent against the dollar. It strengthened 0.2 percent to 30.8376 yesterday in Moscow.

GDP Slowdown

Russia’s economy expanded 2.3 percent from a year earlier in October, decelerating for a fifth month and recording the slowest growth since it started recovering from recession at the start of 2010.

The pace of retail-sales growth unexpectedly declined to 3.8 percent in October after unemployment increased for the first time since January and slower-than-estimated gains in wages and incomes curbed consumer purchasing power.

After raising interest rates by a quarter-point in September to tackle inflation, Bank Rossii left borrowing costs unchanged at 8.25 percent in October and November. The central bank, which is scheduled to discuss monetary policy on Dec. 10, will probably hold rates flat for a third month, according to Vladimir Tikhomirov, chief economist at Otkritie Financial Corp.

“I don’t expect a rate increase,” Tikhomirov said by phone. “If the central bank increases interest rates, there will be a serious hit to economic growth.”

To contact the reporters on this story: Olga Tanas in Moscow at otanas@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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