Russia June Inflation Slows to Six-Month Low as Food Prices Ease

Russian inflation decelerated from a 21-month high as costs for food eased as policy makers wait for a sustained decline in price growth to cut interest rates.

Consumer prices grew 6.9 percent in June, the slowest this year on an annual basis, compared with 7.4 percent in May, the Federal Statistics Service in Moscow said by e-mail today. Economists forecast a slowdown to 7 percent, according to the median of 23 estimates in a Bloomberg survey.

Central bank Chairman Elvira Nabiullina is preparing to lead her first meeting on interest rates in the first half of July amid calls from the government for easing to stimulate lending as the economy slows. Policy makers have held their main rates since a quarter-point increase in September as inflation exceeded the top end of this year’s target range.

“We can expect the emergence of a downward trend,” Tatiana Orlova, a strategist at Royal Bank of Scotland Group Plc in London, said by e-mail before the release. “In June, food-price growth most likely already halted.”

Consumer prices advanced 0.4 percent in the month, according to the statement. Economists forecast a 0.5 percent increase, according to the median of 19 estimates in a Bloomberg survey. Core inflation, which strips out volatile costs including fuel and some food items, advanced 0.3 percent in the month, unchanged from May.

Food Prices

Food prices advanced 8 percent from a year earlier, down from 9.2 percent in May, according to the service. That was also the the slowest pace this year, according to data compiled by Bloomberg.

The ruble weakened 0.1 percent to 33.1720 against the dollar as of 3:31 p.m. in Moscow. Yields on 10-year Russian government bonds rose one basis point, or 0.01 percentage point, to 7.44 percent.

The three-month MosPrime rate, which large Moscow banks charge each other, may decline 22 basis points in the next three months from 7.02 percent today, according to forward-rate agreements tracked by Bloomberg.

Analysts forecast the central bank will cut the overnight and one-week repurchase rates, the main tools used to provide banks with cash, by a quarter point in the third quarter and the fourth quarter before going on hold for 2014, according to a Bloomberg survey last week.

Russia’s gross domestic product growth slowed to 1.6 percent in the first quarter, the weakest since the economy pulled out of a 2009 recession.

Inflation may slow to within Bank Rossii’s target range of 5 percent to 6 percent in September or October, central bank Chairman Sergey Ignatiev told reporters last month before his term ended. Policy makers missed that target last year, with consumer prices advancing 6.6 percent.

“The central bank will probably wait until inflation nears 6 percent,” said Vladimir Pantyushin, chief economist for Russia at Barclays Plc’s investment banking unit in Moscow. “I wouldn’t expect the central bank to come out and take any steps in advance.”

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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