Russian Inflation Unexpectedly Keeps Pace in Blow to Easing

Russia’s inflation rate held steady in August after slowing for two straight months, weakening the case for the central bank to lower interest rates for the first time since 2011.

Consumer prices increased 6.5 percent from a year earlier, unchanged from an eight-month low reached in July, the Federal Statistics Service in Moscow said in an e-mailed statement today. That was above the median estimate of 6.4 percent in a Bloomberg survey of 22 economists. Prices rose 0.1 percent in the month after a 0.8 percent increase in July.

Inflation has exceeded the top end of the central bank’s target range of 5 percent to 6 percent for 12 months, thwarting the central bank from easing monetary policy to counter the worst economic slump since 2009. Policy makers are waiting for a slowdown in inflation to begin a “gradual” reduction in borrowing costs, Bank Rossii Chairman Elvira Nabiullina said in an interview with state-run Itar-Tass published yesterday.

Inflation remained unchanged because of “regulated tariffs’ hike in July as well as ruble weakness,” Dmitry Polevoy, chief economist for Russia at ING Groep NV in Moscow, said in an e-mailed note. Still, the central bank will probably cut the benchmark rate by a quarter-point at its Sept. 13 meeting as weekly data point to the inflation rate falling to 5.6 percent or 5.7 percent this month, Polevoy said.

Seven Months

The ruble has depreciated for seven straight months against the dollar, extending gains after the report to trade 0.4 percent higher at 33.3780 per dollar as of 6:30 p.m. in Moscow.

Bank Rossii held the refinancing rate at 8.25 percent on Aug. 9, while signaling increased concern about the economy. Russia is set to meet this year’s inflation target thanks in part to a favorable trend in food prices, Nabiullina, 49, who took over as central bank chairman in June, told Itar-Tass.

Food prices rose 6.5 percent from a year earlier, compared with 6.8 percent growth in July and 8 percent in June, the service said. Fruit and vegetable prices dropped 11.3 percent from the previous month, while egg and dairy prices rose 7.4 percent and 1.2 percent.

“I don’t see big dangers for the ruble,” former Finance Minister Alexey Kudrin told a conference in St. Petersburg today. “There will be a slight nominal depreciation, even though it will be lower in real terms as our inflation is higher than that of our trade partners. The central bank shouldn’t rush to cut rates, however desirable it would seem.”