The inflation rate dropped to the lowest level in 12 years in April, the State Statistics Service said Wednesday, as the ruble’s longest rally since 2006 kept a lid on prices and a weak economic recovery curbed consumer demand.
The rate fell to an annual 6 percent last month, the slowest since July 1998, from 6.5 percent in March, the service said. The median estimate in a Bloomberg survey of 14 economists was for 6.2 percent. Prices advanced 0.3 percent on the month.
“The weaker euro is at least a net positive for Russia’s inflation rate as most imported food and consumer goods are priced in euros,” Chris Weafer, chief strategist at UralSib, said before the release.
The Central Bank, which has cut the main interest rates 13 times in a year to a record low 8 percent, said last week the pace of inflation remained “favorable” last month. The ruble gained against the dollar in April for a fourth month, the longest stretch since a rally ended in August 2006, and rose against the euro for a seventh month out of eight as the common currency weakened on concern that Europe’s debt crisis is spreading.
The Economic Development Ministry estimates that consumer-price growth may be between 6 percent and 7 percent in 2010 and 2011 and average 6.3 percent this year, the slowest since the Soviet Union collapsed in 1991.
Price growth in March fell to 6.5 percent from 14 percent in the same month last year, the fifth biggest inflation-rate differential among 78 economies tracked by Bloomberg.
Even so, the “economic recovery remains unstable,” the Central Bank said in a statement last week, adding that inflation may accelerate in the second half and a “more detailed analysis” would be required before further changes in policy rates.
Banks are unable to take advantage of slowing inflation as loan demand remains weak. Corporate lending was unchanged in March after falling 0.7 percent in February, while retail loans rose 0.3 percent, compared with a decline of 0.6 the previous month, according to Central Bank data published on April 29.
The economy’s quarterly expansion slowed in the first three months of the year to a seasonally adjusted 0.6 percent, according to the Economy Ministry. On a seasonally adjusted basis, gross domestic product gained a quarterly 1.7 percent in the fourth quarter and 2 percent in the third.