Russian Inflation Fastest Since 2011 on Ruble Drop

Russian inflation accelerated last month to the fastest since August 2011, propelled by the ruble’s weakness and food prices.

Consumer prices rose 7.6 percent from a year earlier after advancing 7.3 percent in April, the Federal Statistics Service in Moscow said today in an e-mailed statement. That matched the median estimate of 21 economists in a Bloomberg survey. Prices rose 0.9 percent on the month.

Runaway inflation has forced the hand of policy makers, leading them to raise interest rates twice since March even with the economy on the brink of recession. Sanctions by the U.S. and its allies over the conflict in Ukraine exacerbated capital flight, leading to the ruble’s decline.

“We can see the effect of the ruble weakening that started in February,” Olga Sterina, an analyst at UralSib Capital in Moscow, said by phone before the release. “The central bank won’t lower rates until there is a noticeable inflation deceleration even as economic growth remains very slow.”

The ruble has lost 6.6 percent against the dollar this year, the second-worst performer among 24 emerging-market currencies tracked by Bloomberg after Argentinian peso. It has strengthened 1.8 percent in the past month, the second-best performance in the group, since Russia softened its rhetoric toward Ukraine and started moving its troops back.

Biggest Problem

President Vladimir Putin in April said he hoped the central bank would be able to keep inflation at 6 percent to 6.5 percent. Price growth overtook issues in housing and utilities to become the biggest problem for Russians, according to a poll by the state-run All-Russia Center for the Study of Public Opinion.

The central bank, which targets 5 percent inflation, predicts it will be able to stabilize price growth in the second half, Chairman Elvira Nabiullina said in April. The Economy Ministry forecasts inflation of 6 percent by year-end and 5 percent by the end of 2015.

The May consumer-price index was also driven by the cost of food products rising 9.5 percent. Pork prices rose after Russia banned imports of the meat from the European Union after an outbreak of swine fever in Lithuania and Poland. Non-food prices increased 5.1 percent.

“The latest run-up in inflation over April-May can be almost exclusively attributed to a price spike in pork and related meat products,” Vladimir Kolychev, economist at Moscow-based VTB Capital, said in e-mailed comments before the data release.

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