Bloomberg News

Russian Inflation Slows More Than Forecast, Easing Way for Cuts

April 04, 2013

Russian consumer-price growth slowed more than forecast in March from the fastest pace in 18 months, supporting the government’s calls for the central bank to reduce borrowing costs.

The inflation rate fell to 7 percent from a year earlier, down 7.3 percent in February, the Federal Statistics Service in Moscow said today in an e-mailed statement. That was less than all 21 estimates in a Bloomberg survey, where the median forecast 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.

“Inflation may decelerate 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 by phone today. “The central bank may lower rates as soon as May, or definitely in June, expecting inflation to slow in the second half.”

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'

The ruble declined for a fourth day against the dollar, weakening less than 0.1 percent to 31.6675 as of 3:00 p.m. in Moscow.

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, he 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.

“We still intend to achieve a reduction in inflation by the end of 2013 to a level of no more than 6 percent,” he said, calling the task “entirely realistic.”

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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