Russian Inflation Quickens to 7.2% in April on Food IncreaseOlga Tanas and Scott Rose
Russian inflation accelerated in April after slowing the previous month as food prices rose faster, strengthening the case to delay easing monetary policy.
Consumer prices jumped 7.2 percent from a year earlier after a 7 percent advance in March, the Federal Statistics Service in Moscow said today by e-mail. That matched the median estimate of 24 economists in a Bloomberg survey. Prices rose 0.5 percent in the month, also in line with economist forecasts.
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.
“This is bad news for the government, which badly wants to ease, but good news for Bank Rossii, which can better resist the pressure to ease significantly this year,” Vladimir Miklashevsky, an economist at Danske Bank A/S in Helsinki, said by e-mail. “In the beginning of the year, a decrease in spring inflation was expected, but it hasn’t happened.”
The ruble was little changed at 31.036 against the dollar as of 7 p.m. in Moscow. The Micex Index of 50 stocks advanced 1.2 percent to 1,430.18 as of the 6:45 p.m. close, the highest level since April 2, according to data compiled by Bloomberg.
Food inflation accelerated to 8.8 percent in April from a year earlier, compared with 8.3 percent the previous month, according to the statement. Core inflation, which excludes volatile costs such as energy, remained unchanged at 0.4 percent from a month earlier.
The ruble weakened 1.6 percent against the central bank’s target basket of dollars and euros in April, its worst monthly performance since August 2012. That contributed to the surge in food prices, which include a greater share of imports in the spring than at other times in the year, said Ariel Chernyy, an analyst at Allianz Investments in Moscow.
April’s acceleration in inflation “surely doesn’t favor rate cuts,” even as the weaker currency was mostly to blame, he said by e-mail.
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.
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.
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.
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 April 25 during a live televised call-in show.
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.
After Putin ordered Elvira Nabiullina, who takes over as Bank Rossii chairman in June, and Shuvalov to prepare a series of measures to increase economic growth, it would make sense to see some reduction in interest rates, perhaps in June, said Dmitry Kharlampiev, head of macroeconomic research at OAO Petrocommerce Bank in St. Petersburg.
“The current pace of inflation at 7.2 percent will hardly allow the central bank to lower its rates at the next board meeting,” he said.