OREANDA-NEWS. Aton Capital research agency reports with reference to the  Federal Statistics Agency reports that consumer prices in Russia rose by 1.6% m-o-m in October, which brings YTD inflation to 9.3% and almost 10.1% y-o-y. Food prices were the primary drivers of inflation acceleration, as prices for items like sunflower seed oil, butter and milk and diary products increased 26.3%, 12.7% and 9.6%, respectively.

Analysts attribute such high inflation to a strong growth of the money supply in 1H07 on the back of high oil prices and strong capital inflow into the economy. Moreover, accelerating food prices could also be attributed to the overall global trend of accelerating food price inflation. The inflation acceleration also shows that grain interventions and price controls imposed by the government have been largely unsuccessful. The experts also think that the anti-inflationary tools available are very limited due to the ongoing liquidity problems in the national banking system, which prohibit any significant money supply squeeze. On the other hand, they also believe that the potential for the further nominal appreciation of ruble is also limited due to accelerating real appreciation, which could seriously dampen prospects for national producers' development. "We believe that these limits on anti-inflationary policies are well acknowledged by the government, which has effectively abandoned its previous inflation target for 2007F and is presently reviewing its target for 2008F. We expect the inflationary pressure to persist until at least the year-end and might even accelerate in early 2008F when price controls are lifted," the experts concluded.