Russian inflation sharpens central bank dilemma on rates

Tue May 7, 2013 8:48am EDT

* Inflation rises to 7.2 pct in April, from 7.0 pct in March

* Higher inflation comes despite slowing economy

* Core inflation rises slightly to 5.7 pct y/y

May 7 (Reuters) - Russia's inflation rate rose in April, underscoring the dilemma facing the central bank which is under pressure to cut interest rates to boost economic growth.

Headline consumer price inflation rose to 7.2 percent last month, official data showed, up from 7.0 percent the previous month and well above the central bank's 5-6 percent target range for the end of the year.

Although last month's rise was in line with analysts' expectations, the inflation spike makes it less likely that the central bank will cut interest rates at its monthly policy meeting next week.

The consumer price index was up 0.5 percent on the month. April's year-on-year reading was slightly below an 18-month record of 7.3 percent reached in February.

Analysts polled by Reuters at the end of last month predicted that the central bank would hold its main policy rates this month, but cut them by 25 basis points in June.

Inflation rose largely due to seasonally high food prices, which rose 0.7 percent month-on-month in April, compared with 0.4 percent for non-food goods and 0.5 percent for services.

Nevertheless, core inflation, which strips out volatile items such as food, also rose slightly. It amounted to 5.7 percent year-on-year in April compared with 5.6 percent in March. (Reporting by Jason Bush; Editing by Douglas Busvine/Ruth Pitchford)

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