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. Last Updated: 07/27/2016

Putin Scolds Ministers Over Increased Prices

Consumer prices jumped in February as panic buying of staples such as sugar sent food prices soaring, and an angry President Vladimir Putin scolded his government for letting prices get out of control.

The 1.7 percent monthly rise was well above economists' expectations and took the cumulative rise so far this year to 4.1 percent. Monday's data means that hopes of getting inflation into single digits in 2006 are already fading, just two months into the year.

"Clearly, the 8.5 percent government inflation figure is out of the window," said Peter Westin, chief economist at MDM Bank in Moscow.

The State Statistics Service said the main culprit behind February's bigger-than-expected gain was food prices, up 3.0 percent month on month, and especially sugar, up 30.3 percent.

Food makes up 43 percent of the country's CPI basket, compared with about 14 percent in the United States and euro zone, making Russian inflation very sensitive to any changes in food prices.

Consumers, many of whom still remember the hyperinflation of the early 1990s, started hoarding essentials after a steep rise in the cost of salt. That, say economists, suggests that popular expectations of high inflation may become entrenched.

"Sugar prices have definitely gone up over the past month, partly due to panic buying linked to the salt crisis," said Andrei Stanshevsky, at farm market research institute IKAR.

"Accelerated growth in food prices is a result of excessive budget spending," said Julia Tseplyayeva, analyst with ING in Moscow, referring to big pay rises for state employees such as doctors and teachers at the start of the year.

Putin lambasted his government for letting inflation run away at the start of the year. "There is a lot of talk, but the economic result is not what we expect," he told ministers in televised remarks.