Russian Inflation Rate Surges to Highest in Three Years

Russian inflation accelerated to the fastest pace in three years, putting pressure on the central bank to raise interest rates even as economic growth shrivels.

Consumer prices jumped 8 percent from a year earlier in September after a 7.6 percent advance the previous month, the Federal Statistics Service in Moscow said today in an e-mailed statement. That matches the median estimate of 21 economists in a Bloomberg survey. Prices grew 0.7 percent from August.

The conflict in Ukraine has sparked an exodus from the ruble, last quarter’s worst-performing currency, while an August ban on some food imports from the U.S., Europe and other nations, retaliation for sanctions against Russia, has further stoked prices. Faster inflation has prompted the central bank to raise its benchmark rate three times this year to 8 percent from 5.5 percent in February.

“Inflation will continue to quicken,” according to Vladimir Tikhomirov, chief economist at BCS Financial Group in Moscow, who cited the food import ban and the weak ruble. “Pressure on the central bank to increase rates will be mounting,” he said by phone before the release.

The ruble lost 14 percent against the dollar in the third quarter, the worst performance among more than 170 currencies tracked by Bloomberg. It weakened 0.8 percent to 39.93 per dollar as of 6:24 p.m. in Moscow.

Policy makers “may continue raising the key rate” if inflation expectations remain elevated, according to a central bank’s statement after it last met on Sept. 12, when it left borrowing costs unchanged. The next meeting is set for Oct. 31.

High Expectations

Prices will continue to increase this month, according to 83 percent of respondents in a Sept. 28 survey by the Public Opinion Foundation.

In response to the U.S. and European Union sanctions targeting Russia’s businessmen, companies and the energy, finance and weapons industries, Putin restricted imports of meat, fish, dairy, fruits and vegetables from the U.S., the EU, Canada, Norway and Australia for a year.

The consumer-price index may reach 7.8 percent by year-end, according to the median estimate of 37 economists in a Sept. 25 Bloomberg survey. Inflation may be about 8 percent this year, central bank Governor Elvira Nabiullina said yesterday at a business forum in Moscow.

“We still think that the threat on the food side” isn’t likely to “last much longer than the fourth quarter of 2014 and the first half of 2015,” Dmitry Polevoy, the chief economist for Russia and the Commonwealth of Independent States at ING Groep NV, said in an e-mailed note. “Especially given the harvest conditions are expected to be strong now and global commodity prices provide a non-inflationary backdrop.”

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