Russian inflation accelerated in March to the fastest on an annual basis since 2002 even as slowing weekly readings allow the central bank to press ahead with cutting borrowing costs. Consumer prices rose 16.9 percent from a year earlier, compared with 16.7 percent in February, the Federal Statistics Service in Moscow said in a statement. The median estimate of 20 economists was 16.8 percent, according to a Bloomberg survey. Prices gained 1.2 percent in the month.
Bank of Russia has started to ease monetary policy this year, following six increases in the benchmark rate last year, as the world’s biggest energy exporter enters its first recession since 2009. The economy has replaced inflation as the population’s top concern, according to a survey published by state-run pollster VTsIOM on March 31.
“Price growth could have peaked over March,” Dmitry Polevoy, chief economist for Russia and Commonwealth of Independent States at ING Groep in Moscow, said by e-mail before the statement. “It’s important that weekly and monthly inflation continue to decelerate.”
The balance of risks has shifted toward “a more significant cooling of the economy,” the central bank said in a statement March 13 after reducing the benchmark rate by 100 basis points to the current 14 percent.
Gross domestic product may shrink as much as 4 percent in 2015 and continue to deteriorate until the first quarter of next year, Bank of Russia Governor Elvira Nabiullina said after the March 13 decision. The regulator will consider further easing if inflation expectations slow, she said. The next meeting on rates is scheduled for April 30.
Price growth has started slowing on a weekly basis. It stabilized at 0.2 percent each week in March, the lowest since November. Weak economic activity will act as a brake on inflation, while the impact of ruble depreciation and trade restrictions that ignited price growth will wear off this year, according to the central bank.
The Russian currency has strengthened this year, showing the best performance among emerging markets in February and March. The ruble gained 1.4 percent to 55.8110 against the dollar as of 3:54 p.m. in Moscow.
“The central bank will in our view have ample room to cut rates more aggressively than priced,” Goldman Sachs economists said in e-mailed report April 2.