Russia Inflation


Inflation drops to historic low

In January, consumer prices rose 0.5% over the previous month amid increases across all main price categories. The monthly figure was a tad above December's 0.4% rise but below the 1.1% rise recorded in January last year. As a consequence, annual headline inflation plunged from December's 6.1% to 4.2%, marking a post-Soviet historic low. According to analysts, one of the main drivers behind the drop was the government's decision to freeze until July the planned increases in the gas and utility bills. The move appears to be aimed at tempering public discontent ahead of presidential elections on 4 March. That said, the Russian economy continues to benefit from declining food prices as a consequence of 2011's good harvest, which followed a severe drought in 2010. The core consumer price index, which excludes short-term price changes influenced by administrative and seasonal factors, rose 0.5% in January, a notch above the 0.4% rise recorded in December. Despite the monthly increase, however, annual core inflation dropped from December's 6.6% to 6.0% in January. The government expects inflation to end the year between 5.5% and 6.0%. Meanwhile, at its meeting on 3 February the Central Bank left the refinancing rate unchanged at 8.00%, in a move expected by the market.

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