OREANDA-NEWS. September 08, 2010. Last month consumer prices in Russia rose 0.6% MoM, which is the highest rate for the month of August since 2001. The most significant driver for inflation was food prices, which showed a 0.9% MoM rise this August, thus rebuffing the traditional summer food deflation trend, reported the press-centre of OTKRITIE Financial Corporation.

View: The news was expected given the pick-up in weekly inflation since late July on the back of a series of official downgrades of Russia’s agricultural output. However, August inflation data also points to a broader problem: by mid-2010 the crisis-related deflationary trend has run out of stream as domestic consumer spending started to rebound, also pushing prices upward. The trend in the annualized inflation rate is likely to be made steeper by the base factor effect (Russia had an unusually long period of zero monthly inflation between August and October 2009).

Action: The government sees recent moderation in the inflation rate as perhaps the most significant positive macroeconomic result of the past two years. Cabinet and Kremlin officials have stressed on numerous occasions that they would do everything possible to halt any rise in consumer prices. Therefore, both President Medvedev and PM Putin’s government were quick to respond to the build-up of inflationary pressures last month by introducing measures of intense administrative pressure (anti-monopoly investigations, close monitoring of trade chains, etc.). We believe that these measures are unlikely to garner significant results.