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. Last Updated: 07/27/2016

CPI Falls for First Time Since 1997

Lower produce prices sent consumer prices into their most dramatic fall of post-Soviet times in August as the summer harvest pushed food costs lower and the government capped prices for electricity, gas and train services.

But analysts said the government would still have difficulty meeting its annual inflation target.

Consumer prices fell 0.4 percent in August from the previous month, the first monthly drop since September 1997, when prices declined 0.3 percent, the State Statistics Committee said Thursday.

Russians normally pay less for fruits and vegetables in the summer because many grow their own produce or trade them with vodka in unrecorded transactions.

The government also limited how much Gazprom, the biggest gas producer, and Unified Energy Systems, the No. 1 power utility, can raise utility bills.

"It's far lower than I expected -- it's good news," said Peter Westin, an economist at Aton brokerage. "Food prices usually fall as the harvest is collected but the real crux of the matter is that service prices are growing at a slower level than at any time since 1997."

The inflation target for this year is between 10 percent and 12 percent. Russia, which has been trying to cut inflation since it topped 2,600 percent in 1992, has not met its full-year target since 1997.

Central Bank Chairman Oleg Vyugin had forecast an unchanged CPI for August.

Prime Minister Mikhail Kasyanov told the Cabinet on Thursday that consumer prices had risen 8.3 percent in the first eight months of the year compared with a 9.9 percent rise in the same period a year ago.

The State Statistics Committee said in a statement that the basic index, which excludes short-term fluctuations due to administrative and seasonal factors, rose 0.7 percent in August and 6.2 percent since the start of the year.

Food prices fell 1.4 percent in August from the previous month, while nonfood product prices rose 0.6 percent and paid services rose 0.7 percent. It is the biggest decline since at least before 1996, according to the committee.

Vegetable prices fell by 27 percent from the previous month, with carrots 31 percent cheaper and cabbages 30 percent cheaper, the committee said.

Finance Minister Alexei Kudrin said last month that the government will not allow prices for electricity and railway tickets to rise faster than inflation next year.

The government forecasts the 2004 inflation rate from 8 percent to 10 percent. (Bloomberg, Reuters)