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. Last Updated: 07/27/2016

Inflation Jumps to 11-Month High

Inflation spiked to an 11-month high in January, data showed on Thursday, but the seasonal increase in prices was less than forecast, paving the way for interest rate cuts to resume soon.

Consumer prices rose 1.6 percent in January, propelled by a traditional pickup in service costs at the start of the year.

Underground transport ticket prices jumped 13.8 percent, while water, heating, gas and electricity bills rose 8.8 percent to 14.5 percent.

But the month-on-month increase in prices was smaller than the 2 percent forecast by analysts and a third below the 2.4 percent reading in January 2009.

On a year-on-year basis, inflation actually fell to 8 percent from December's 8.8 percent.

With the benchmark-refinancing rate currently at 8.75 percent, that gives the Central Bank room for more monetary easing without compromising its aim to keep real interest rates in positive territory.

The Central Bank paused in the easing cycle in January after nine months of rate cuts aimed at helping the economy out of recession by encouraging banks to offer more affordable loans.

Analysts had expected the easing to resume in February, and the latest inflation data will likely support such views.

"If inflation stays at 0.1 percent to 0.2 percent [per week] in the first weeks of February, the Central Bank is likely to continue cutting rates. Hence, we expect a 25 basis point rate cut in February and 75-100 bps cumulatively by the middle of 2010," analysts at Renaissance Capital said in a client note.

VTB Capital also expects a 25 basis point cut this month, while Trust and Troika Dialog say the move could be as much as 50 basis points.

Central Bank does not pre-announce the dates of its board meetings on monetary policy, making it hard to predict the exact timing of the moves.

For now, it only issues a release when there is a change in interest rates, but in the future it plans to issue statements explaining its reasoning even if policy is left on hold.

The median forecast in a Reuters poll last week shows the refinancing rate cut to 7.75 percent by the end of the third quarter, with rate hikes starting in the final months of the year.