Breaking News


Russian Inflation Holds at Post-Soviet Despite Ruble Drop

Russian inflation held at a post- Soviet low last month even as the ruble’s plunge threatens to fuel price growth, adding to the central bank’s concerns about the higher cost of living in the second half of the year.

Consumer prices advanced 3.6 percent in May from a year earlier, the Federal Statistics Service in Moscow said in an e- mailed statement today. Prices rose 0.5 percent from a month earlier. That matched the median estimates of economists in two Bloomberg News surveys.

The world’s largest energy exporter drove inflation to record lows by pushing back annual increases in utility tariffs to mid-year before President Vladimir Putin’s election to the Kremlin in March. The central bank is warning that inflation risks remain in the second half.

“The weaker ruble is another uncertainty, but given what we saw in autumn, a 10 to 15 percent depreciation is not big enough to push inflation much higher,” Vladimir Kolychev, chief economist at Societe Generale SA’s OAO Rosbank (ROSB) unit in Moscow, said by telephone before the release. The central bank’s stance now is “restrictive enough” to cool the economy in the past two quarters, he said.

Bank Rossii will probably wait until the third quarter to assess the July increase in regulated prices and this year’s harvest before acting on rates, he said.

The ruble strengthened 0.7 percent against the dollar to 33.2325 as of 11:10 a.m. in Moscow, its second day of gains. The ruble-denominated Micex Index of 30 stocks also rose for a second day, adding 0.8 percent to 1,316.85.

Ruble Drop

The ruble fell 12 percent against the dollar last month, the sharpest drop since January 2009 and the most among 25 emerging-market currencies tracked by Bloomberg. It lost 9 percent against the central bank’s target basket of dollars and euros.

Prime Minister Dmitry Medvedev told central bank Chairman Sergey Ignatiev at a June 2 meeting to step up sales of foreign currency to bolster the ruble if needed. The situation is “under control” and any further weakening of the currency would be slowed by greater interventions, Ignatiev was cited as saying.

Bank Rossii said after its rates meeting May 10 that policy makers expected to meet their target of containing price growth within the target range of 5 percent to 6 percent. Increases to regulated tariff prices as well as the end of seasonal effects from cheaper food prices may drive up inflation in the second half, according to the statement.

Core Inflation

Core inflation, which excludes volatile costs such as energy, slowed to 0.2 percent in May from a month earlier, less than the 0.4 percent median forecast of 10 economists in a Bloomberg survey.

The ruble’s depreciation last month may start feeding into the inflation rate because imported goods including food have a significant weighting in the consumer price index, Vladimir Tikhomirov, chief economist at Otkritie Financial Corp. in Moscow, said by telephone June 1.

“If the ruble remains at current levels, it will start to have an effect on imports and prices in one to two months,” he said. “If the ruble is able to appreciate a bit, then the effect from the sharp weakening of the ruble might turn out to be not so significant.”

To contact the reporter on this story: Scott Rose in Moscow at

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.