Russian Inflation Probably Quickened in April After Slowdown

Russian inflation probably accelerated in April after slowing a month earlier, strengthening arguments to delay easing monetary policy.

Consumer prices rose 7.2 percent from a year earlier after 7 percent in March, according to the median estimate of 24 economists in a Bloomberg survey. Prices increased 0.5 percent in the month, another poll showed. The Federal Statistics Service in Moscow will release the data today or tomorrow.

Policy makers led by outgoing central bank Chairman Sergey Ignatiev are waiting to see a sustained slowdown in inflation before cutting their main interest rates. Restraining inflation remains a priority and the government won’t compromise efforts to subdue price growth with economic stimulus, First Deputy Prime Minister Igor Shuvalov said April 18 in Moscow. The economy grew 2.1 percent in the last three months of 2012 from a year earlier, the slowest rate since a 2009 contraction.

“The trend of declining inflation may not continue in April,” Maxim Oreshkin, chief economist for Russia at VTB Capital in Moscow, said by phone yesterday. “The central bank may postpone cutting rates for one month.”

The ruble in April weakened 1.6 percent against the central bank’s target basket of dollars and euros, its worst monthly performance since August 2012. It traded down 0.2 percent at 35.3929 at 12:21 p.m. in Moscow.

A weaker currency was the main reason for faster inflation last month by making foreign goods more expensive, according to Vladimir Tikhomirov, chief economist at Otkritie Financial Corp. in Moscow.

Import Costs

“Consumer prices probably grew in April due to the import component,” Tikhomirov said by phone yesterday. “The share of import products increases in the consumer basket in the spring, especially in the food basket.”

A seasonal increase in the cost of vegetables came earlier this year than in 2012 and may fan price growth in April while leading to a “stronger decline” in May, VTB Capital analysts Oreshkin and Daria Isakova said in an e-mailed note today.

Bank Rossii last month took the biggest step toward easing monetary policy since raising all rates in September by cutting some borrowing costs on less frequently used credit instruments. The central bank may lower its main interest rates before price growth decelerates to within its range of 5 percent to 6 percent and expects to contain inflation below the top of its target band, Ignatiev said last month.

The central bank may cut the refinancing rate in the second quarter by a quarter point to 8 percent, according to the median forecast of 13 economists surveyed by Bloomberg.

‘Declining Trend’

Speaking at an economic-policy meeting with President Vladimir Putin and senior officials April 22, Ignatiev said he saw a continued “declining trend” for interest rates, with inflation remaining a key consideration for policy makers.

While government members including Economy Minister Andrei Belousov remain critical of the central bank’s restrictive stance, partially blaming high rates for Russia’s economic slowdown, tight monetary policy is “largely justified because it’s aimed at subduing inflation,” Putin said during a live televised call-in show April 25.

Russians rank inflation as their second-biggest concern behind housing and access to utilities, according to a March 15 poll by the state-run All-Russian Center for the Study of Public Opinion.

“Inflation will remain a priority as consumer-price growth significantly exceeds target,” Vladimir Pantyushin, chief economist at Barclays Plc’s investment-banking unit in Moscow, said by phone yesterday. “We see arguments that interest rates shouldn’t be touched due to concerns over inflationary expectations.”

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