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UPDATE 1-Russia inflation in June higher than officials expected
July 6, 2017 / 3:58 PM / 5 months ago

UPDATE 1-Russia inflation in June higher than officials expected

    * June inflation sped up to 4.4 pct, exceeding expectations
    * Central bank says high inflation is a "negative surprise"
    * Analysts still expect to cut rates further this

 (Adds details, comments from and analysts )
    By Polina Nikolskaya and Andrey Ostroukh
    MOSCOW, July 6 (Reuters) - Consumer inflation in Russia
unexpectedly accelerated in June, data showed on Thursday,
challenging the central bank's aim of bringing inflation to a
post-Soviet low of 4 percent this year.
    The consumer price index (CPI) showed prices rose 4.4
percent in June in year-on-year terms, above analysts'
expectations for a rise of 4.1 percent in a Reuters poll.
    Annual inflation, which picked up from 4.1 percent in May,
was mostly driven by higher food prices, data from the
statistics service showed, as Russia's harvest was dented by
unusually cold weather.
    Food prices rose 1 percent on the year in June compared with
just a 0.1 percent increase in the same month a year ago.
    "That appears to be due to fruit and vegetable inflation,"
Capital Economics research firm said.
    Inflation, which stood at 0.6 percent in monthly terms, also
exceeded expectations of the economy ministry that forecast
prices would grow by 4.0-4.1 percent in year-on-year terms and
by 0.3-0.4 percent in month-on-month terms.
    The head of the central bank's monetary policy department,
Igor Dmitriev, said the June inflation reading became a
"negative surprise". 
    Dmitriev, however, said it was too early to say if higher
inflation boosts chances that the central bank would avoid
cutting rates at its next policy meeting in late July.

    The central bank is closely watching developments around
consumer prices, saying its number one goal for this year is to
bring and stabilise inflation at 4 percent.
    Despite the latest pick up in pace of prices growth, the
central bank may still reach its 2017 target as core inflation,
which does not include prices for food and fuel as well as
utility tariffs, slowed to 3.5 percent in June, analysts say.
    Russian central bank could still trim the key rate by 25
basis points from its current level of 9 percent at its next
board meeting, said Dmitry Polevoy, chief economist at ING Bank
in Moscow.
     "Its actual reaction will mostly depend on to what extent
the rise in food prices and the recent rouble weakness feeds
through to households' inflation expectations," Polevoy said,
referring to the central bank.
    The Federal Statistics Service, or Rosstat, gave the
following details: 
     RUSSIAN CPI              June 17   May 17    June 16 
     Mth/mth pct change       +0.6      +0.4      +0.4 
     - food                   +1.0      +0.6      +0.1 
     - non-food               +0.1      +0.2      +0.5 
     - services               +0.7      +0.4      +0.6
     Y/Y pct change           +4.4      +4.1      +7.5
     Core CPI y/y pct change  +3.5      +3.8      +7.5
   NOTE - For key Russian indicators click here. 

 (Reporting by Polina Nikolskaya and Andrey Ostroukh; Editing by
Hugh Lawson)

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