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IKAR in Mass Media

Russian Inflation Unchanged in March as Ruble Tames Prices

11 апреля 2011 года

April 4 (Bloomberg) -- Russian inflation was unchanged in March after the government capped food -price increases and a stronger ruble made imports cheaper.

Consumer prices rose 9.5 percent from a year earlier, the same as in February, the Federal Statistics Service in Moscow said today in an e-mailed statement. The result was in line with the median estimate of 10 economists surveyed by Bloomberg. Consumer prices advanced 0.6 percent from a month earlier, compared with 0.8 percent in February.

Russia is grappling with the fastest inflation among the so-called BRIC countries after the worst drought in at least half a century damaged the country’s harvest. Rising prices may stifle economic growth by cutting into disposable incomes and prompting the central bank to lift borrowing costs.

“The government’s policy of releasing grain from the state intervention fund was the key reason for breaking the back of inflation,” Ivan Tchakarov, chief economist for Russia and the former Soviet Union at BofA Merrill Lynch Global Research in Moscow, said by e-mail before the release. “Inflation will hover around these levels before decelerating in a more pronounced manner in the second half.”

Drought

Inflation is easing after the rate quickened for six consecutive months through January following the country’s crop-destroying drought last summer. The grain harvest may reach 90 million tons this year, about 50 percent higher than in 2010, the Agriculture Ministry said on April 1.

Russia’s so-called OFZ bond due in March 2018, the government’s longest-dated ruble debt sold since the crisis, pared gains after the report and was yielding 7 basis points less at 4:20 p.m. in Moscow. The ruble added 0.4 percent to 28.2925 per dollar, heading for a third consecutive daily gain.

The ruble has risen about 8 percent against the dollar this year as the central bank allowed the currency to trade more freely on March 1.

The central bank has been tightening monetary policy since December, when it first raised the overnight deposit rate to pull cash out of the economy. The regulator raised its main rates in February and has also lifted reserve requirements and allowed the ruble to strengthen to rein in inflation.

Not Aggressive Enough

“The central bank has not been aggressive enough in monetary tightening,” which should have started several months earlier, Juri Kren, a London-based emerging-markets economist at IDEAglobal, said by e-mail. “The authorities seem to be more concerned about the recovery rather than inflation.”

Food prices rose an annual 14 percent last month, led by grains, butter and fruit and vegetables, the service said.

The government banned exports of grain on Aug. 15 until this July and has been selling from its stockpiles to help make up for a 37 percent drop in last year’s harvest. Interventions may reach 1.5 million tons of grain by June, compared with a planned 2.5 million tons because of weaker demand, according to the Institute for Agricultural Market Studies.

Inflation this month probably won’t exceed 0.4 percent, Deputy Economy Minister Andrei Klepach said last week. The central bank is trying to keep inflation between 6 percent and 7 percent for 2011, down from 8.8 percent for the past two years.

“Exchange-rate appreciation might have a relatively quick effect on consumer prices,” Sanna Kurronen, a Helsinki-based economist at Danske Bank A/S, said before the release. “Still, commodity prices, producer prices, wage growth -- everything is pointing to higher inflation.”

After being “quite disciplined” last year, the government is boosting spending before parliamentary elections in December and a presidential vote next year, which may become a “new inflation driver,” she said.

The government will allocate 105 billion rubles ($3.7 billion) this year to support the labor market and extend unemployment benefits, Prime Minister Vladimir Putin said at a government meeting today in Moscow.

Source: Bloomberg  |   |  Comments: 0   Views: 47

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