Inflation in Russia Hits Nine-Month High on Crimea Tensions

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Inflation in Russia Hits Nine-Month High on Crimea TensionsInflation in Russia in the month of March was the highest in nine months, fuelled by the decline of the ruble as the country faced off against the West over the Ukraine crisis.

Consumer prices grew 6.9 percent from a year ago, up from a gain of 6.2 percent in February, according to the Federal Statistics Service in Moscow. This exceeded the average estimate of a growth of 6.8 percent in a Bloomberg survey of 18 economists. Prices plunged 1 percent in March, against forecasts of 0.9 percent as the economy slid further.

The ruble plunged as Russia entered into its biggest standoff against the West since the Cold War, making it harder for the central bank to keep inflation under 5 percent.

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 “The accelerating inflation is a result of the weakened ruble,” Vladimir Kolychev, the Moscow-based chief economist for Russia at VTB told Bloomberg before the report was released. “Part of this effect is already visible in rising food prices. We’ll see the first signs of the weakened ruble on non-food product prices.”

Food prices surged 8.4 percent last month from a year ago, up from 6.9 percent in February. Prices of non-food items grew 4.6 percent in March, up from 4.3 percent in February.

The ruble has plunged 6.9 percent versus the greenback since January, making it the second-worst performing currency out of the 24 emerging-market currencies monitored by Bloomberg after the Argentine peso. The ruble rose 0.6 percent on Friday to trade at 35.2850 as of 6.51 p.m. in Moscow trade.

Vladimir Osakovskiy, an economist at Bank of America Merrill Lynch in Moscow said the ruble will remain weak this month, which may send inflation up to 7 percent in April.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com