Food prices helped drive Russian inflation sharply higher in June, data showed on Wednesday, marking an end to months of record low price increases and buttressing the central bank’s case for keeping interest rates on hold.
Despite tumbling inflation during the first five months of 2012, the central bank has resisted cuts in interest rates, arguing that record low inflation was largely the result of temporary factors -an argument underscored by the faster-than-expected acceleration last month.
Annual inflation rose to 4.3 per cent in June from 3.6 per cent in May, when inflation was at its lowest level since the end of the Soviet Union two decades ago, having fallen from 6.1 per cent in 2011.
The consumer price index rose by 0.9 per cent month-on-month in June after rising 0.5 per cent in May, the Federal Statistics Service said. The increase came above analysts’ average forecast of a 0.6 per cent rise.
“What it basically shows is that inflation will easily get back into the central bank’s target range by the third quarter. And the central bank has basically been right in warning (about higher inflation),” said Clemens Grafe, chief Russia economist at Goldman Sachs.
“We still think they have a chance of getting inflation within the upper end of the target range, but it’s going to be tight. There’s no way that they can loosen policy.”
The central bank’s official target is to keep inflation within a range of 5-6 per cent by the end of this year. Analysts polled by Reuters predict that by year-end inflation will reach 6.5 per cent. The latest monthly inflation figures do not include the impact of delayed price rises for gas, water and electricity at the beginning of July, expected to lead to higher inflation this month and for the remainder of the year.