Inflation Seen Rising To 11.5%

The Economic Development and Trade Ministry raised its annual 2007 consumer price index growth forecast by half of a percentage point from 11 percent to 11.5 percent on Tuesday, less than one week before State Duma elections.

"Inflation risks remain high. Growth in food products prices continues," the ministry said in its monthly report, pointing out that food prices rose by 0.5 percent in the first 12 days of November, above the headline CPI growth rate of 0.4 percent.

Analysts polled saw full-year CPI growth at 10.5 percent in October, in line with the earlier forecast from the ministry. The government was forced to admit in September that its 8.0 percent full-year target was not achievable.

The inflation spike, which came on the back of lavish spending in the pre-election year, has dented the popularity of United Russia. Some analysts have said inflation below 12 percent poses no threat to the economy.

President Vladimir Putin reshuffled his government in September, ordering the ministers to curb prices. He then made the decision to lead United Russia in the December polls.

Russia has since introduced varied measures to try to contain inflation. A 10 percent export tariff on wheat and a 30 percent export tariff on barley came into effect on Nov. 12 to keep more grains at home and depress bread prices.

The government is selling grain from its intervention stocks to domestic flour millers, although sales have so far done little to tame prices. Producers and retailers have agreed to freeze prices on staples. Import tariffs will be cut on soy, sunflower and rapeseed oil to 5 percent from 15 percent in mid-2008.