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. Last Updated: 07/27/2016

Prices Rise Less Than Expected

Russian consumer prices rose less than expected in January, data showed Tuesday, tempering market speculation that the Central Bank may allow the ruble to rise further to rein in price pressures.

The consumer price index increased in January by 1.7 percent month-on-month, accelerating from December's rise of 0.8 percent due to New Year's hikes in charges for communal services. But the figure was well below last year's rise of 2.4 percent, and comfortably undershot analysts' average forecast of a 2 percent rise.

Speculation has swirled in recent days that the Central Bank might allow the ruble to rise against the dollar-euro basket it uses as a policy target, but economists said appreciation pressure was now likely to ease.

"There is clearly less pressure in terms of ruble appreciation, in line with the market consensus that the ruble may not rise as much this year as in previous years," said Natalya Orlova, chief economist at Alfa-Bank.

The ruble barely moved after the data, trading 0.1 percent down, at 26.56 to the dollar. It was 0.06 percent down, at 29.66 on the Central Bank's currency basket -- composed of 60 cents and 40 euro cents. On a year-on-year basis, prices in January were up by 8.2 percent, with Orlova saying Russia should now be able to hit its end-2007 inflation target of 8 percent.

But other economists cautioned that with elections looming they would be watching whether state spending stayed under control.

"I think inflation will be higher than 8 percent; I'm looking at 8.5 percent," said Yulia Tseplyayeva, chief economist at ING Bank.