Economists said Wednesday that monthly price inflation was slowing at a satisfactory rate and is on course to drop further by the end of the year.


Charles Wyplosz, a professor of economics at the INSEAD business school in France, who advises the governmental Working Center for Economic Reform, predicted monthly inflation would fall to 2 or 3 percent by the end of the year.


"On inflation, everything is happening as it should," Wyplosz told a press conference.


The current rate, he said, is well within targets set by the International Monetary Fund for the release of a $6.8 billion standby loan.


Economists were also bullish on foreign investment. Mstislav Afanasyev, deputy director of the Center, said he expected investment would pick up this year despite continued high rates of monthly inflation, which clocked in at 7.9 percent in May.


Brokers and economists have predicted a late-summer upsurge in share prices, as both domestic and foreign investors are encouraged by positive first-quarter economic indicators and continued government adherence to an austere monetary program. But the stock market has been volatile in recent weeks, owing partly to increased reserve requirements for Russian banks.


According to Sergei Pavlenko, director of the Center for Economic Reform: "The heating up of the stock market is because agents in the stock market expect a new investment boom at the end of August and the beginning of September similar to that which occurred in midsummer last year."


The stock market rose substantially late last month, sending the ruble-based Moscow Times Index of the 50 most widely traded Russian stocks up to its highest level since the ruble crash in October last year.


However, the market has dipped again slightly since.


There is plenty of scope for a new increase because the market capitalization of Russian industrial enterprises is on average just 5 percent that of equivalent companies in the West, according to data compiled by the Center.


The capitalization of Russian traded companies in the industrial sector is roughly equal to their average after-tax profits for one year, compared with 18 years for UK companies and 16 years for U.S. firms.


"This is extraordinarily low," said Richard Layard, who works with the government in conjunction with the London-based Center for Economic Performance.


"It would be surprising if there were not some rise on the stock market in the next six months," he said at the press conference.