Bloomberg News

Russian March Inflation Slows More Than Economists Estimated

April 04, 2013

Russian Inflation Slows More Than Forecast, Easing Way for Cuts

The inflation rate was 7.2 percent as of March 25. Photographer: Andrey Rudakov/Bloomberg

Russian consumer-price growth slowed more than economists estimated in March, supporting government calls for the central bank to reduce borrowing costs.

The inflation rate fell to 7 percent from 7.3 percent in February, which was the highest in 18 months, the Federal Statistics Service in Moscow said today in an e-mailed statement. The figure is lower than all 21 estimates in a Bloomberg survey, where the median was 7.2 percent. Prices rose 0.3 on the month, less than the 0.5 percent median in a second Bloomberg survey.

Central bank Chairman Sergey Ignatiev, whose final term expires in June, said yesterday that inflation would continue to slow this year, allowing more room for rate cuts to bolster the sagging economy. Bank Rossii left its main interest rates unchanged this week, while reducing some less-used borrowing costs in a “first decision” toward easing.

“Weekly inflation suggested a higher figure, so we are positively surprised,” said Artem Arkhipov, chief economist for Russia at ZAO UniCredit Bank in Moscow. The data will give the central bank “greater confidence in its easing steps.”

The ruble reversed losses against the dollar to trade less than 0.1 percent stronger at 31.6265 as of 4:22 p.m. in Moscow.

The Russian economy expanded 2.1 percent in the fourth quarter from a year earlier, the slowest pace since a recession in 2009. Ignatiev yesterday said he was “seriously concerned” with the deceleration of growth, which he said continued into the start of this year with a 1.5 percent drop in industrial production in January and February from a year earlier.

‘Huge Challenge’

Elvira Nabiullina, Putin’s former economy minister and current aide, is poised to take over monetary policy in June, when Ignatiev’s third and final term expires.

Weaker lending to companies presents a “huge challenge” to the country’s financial industry, she said in speech yesterday. Bank Rossii “can’t compensate for all of the market sources of financing of the banking system,” she said.

The central bank this week kept the benchmark reference rate at 8.25 percent for a seventh month. High rates are partially to blame for low investment, Finance Minister Anton Siluanov said yesterday.

The central bank still expects to contain inflation below 6 percent, the top of its target range, Ignatiev said yesterday. Bank Rossii may lower its main interest rates before inflation decelerates to within its target range of 5 percent to 6 percent, he said.

‘Some Cheer’

Core inflation, which removes some volatile items, advanced 0.4 percent in the month, the same pace as in February and in line with the median of 10 forecasts in a Bloomberg survey.

The headline “inflation figure came in lower than expected, which should be cause for some cheer,” Alexander Morozov, chief economist for Russia at HSBC Holdings Plc in Moscow, said by phone. With the figure still a full point above target, the central bank still might not reduce rates at the next meeting, said.

The inflation rate was 7.2 percent as of March 25. A drop in grain prices, which began in February and will probably continue for the coming months, is an important factor, Ignatiev said.

Inflation may slow to 6.5 percent in June if “nothing serious happens” in the global economy, Vladimir Tikhomirov, chief economist at Otkritie Financial Corp. in Moscow, said today before the release. The central bank may lower rates as soon as May, or definitely in June, expecting inflation to slow in the second half, he said.

To contact the reporters on this story: Ott Ummelas in Tallinn at; Scott Rose in Moscow at

To contact the editor responsible for this story: Balazs Penz at

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