Russia braces for fastest inflation in half a decade

  • Article by: EVGENIA PISMENNAYA , Bloomberg News
  • Updated: August 15, 2014 - 11:44 PM

Russian President Vladimir Putin

Russia is preparing for consumer prices to rise at the fastest pace since 2010 after President Vladimir Putin banned food imports from the United States and its allies and backed a regional sales tax, according to three officials.

Annual inflation is likely to accelerate to 8 percent in 2015, far above the 4.5 percent rate targeted by the central bank, the government officials said, asking not to be named because the information isn’t public. Prices may grow as much as 10 percent next year to December for the first time since 2008 if the United States and the European Union widen sanctions and Russia retaliates again, two of them said.

With inflation topping Russians’ daily concerns, the central bank is fighting to rein in price growth that exceeded targets for a 23rd month in July. The battle will prove harder after Russia last week blacklisted $9.5 billion of agricultural products and food to strike back at the United States, the E.U., Norway, Canada and Australia for sanctions over the crisis in Ukraine.

Metro AG’s Cash & Carry unit in Russia has run out of imported salmon and cheeses such as Parmigiano-Reggiano, Camembert and Brie, the retailer said in a statement. It’s looking for replacements even as vendors seek to charge 4 percent to 10 percent more for supplies.

Russia’s Federal Anti-Monopoly Service has pledged to watch food prices and asked residents and the country’s biggest retailers to report increases as the government seeks to avoid discontent among consumers and play up the benefits to domestic producers.

Still, people are set to feel the impact in their shopping carts, and consumer demand has already cooled, dragging on the economy.

Russia’s central bank has said consumer-price growth will reach 6 percent to 6.5 percent this year, missing its 5 percent target this year. The regulator is reviewing all its estimates, taking into account “all factors,” and will announce updates in September, its press service said in response to Bloomberg questions.

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