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. Last Updated: 07/27/2016

Prices Hold But Ruble Set to Rise

Consumer prices rose by 0.6 percent in May, in line with consensus expectations but too little to trigger an immediate revaluation in the ruble.

But economists said Tuesday's price data meant the Central Bank would have to allow the ruble to appreciate within months if it is to hit its full-year inflation target of 8 percent.

"We think they will have to let the ruble appreciate further, even though it's something they are reluctant to do," said Ivailo Vesselinov, who follows the economy for Dresdner Bank.

Vesselinov forecast that the Central Bank, which targets the ruble's exchange rate against a basket of dollars and euros, would have to allow the ruble to rise against that basket by 0.3 to 0.5 percent within the next two to three months.

Another upward move could follow later in the year if inflation looks like it will overshoot, said Vesselinov, who forecasts inflation of 8.2 percent for 2007 as a whole.

Price growth in May was driven by a 1 percent rise in prices for foods, with fruit and vegetables up by 7.8 percent.

Vladimir Pantyushin, economist at Renaissance Capital, forecast an uptick in inflation over the summer that would trigger a Central Bank revaluation by September at the latest.

"The only tool the authorities have [to fight inflation] in the current environment is the exchange rate. ... We are definitely going to see more revaluation," he said.