Russia's Inflation Rate Declined to 14.7% in July


Russia's July inflation rate fell more than economists forecast to 14.7 percent as fruit and vegetable costs declined.

The annual rate dropped from 15.1 percent in June, when it was the highest in 5 1/2 years, the Federal Statistics Service said in an e-mail today. In the month, prices gained 0.5 percent, led by a 6.7 percent decline in fruit and vegetables.

The slowdown may help the government meet its 2008 target of 11.8 percent after it struggled to control inflation because of record global oil and gas prices. First deputy central bank Chairman Alexei Ulyukayev said on Aug. 1 that price growth will slow by year's end after Bank Rossii raised borrowing costs four times since January.

Manufacturing rose in July at the slowest pace in 2 1/2 years after inflation led to job cuts and fewer orders, according to VTB Bank Europe's Purchasing Managers' Index from Aug. 1.

The World Bank has warned the nation should focus on stemming inflation now or face making even larger spending cuts later, which would slow economic growth.

The central bank has expanded the ruble's trading band at least three times since May 14, when it said it would intervene in foreign-exchange markets at varied and unpublicized levels to deter speculators and curb inflation.

The central bank buys and sells rubles daily to limit the currency's gains and their effect on the competitiveness of local exports. By widening the band and allowing the ruble to appreciate, the central bank reduces the cost of imports.


TradingEconomics.com, Bloomberg
8/25/2008 8:14:37 AM