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Inflation in Russia may top 11% in 2007

Russia's inflation may reach 11% for the full year according to the Economic Development and Trade Ministry. Previously the government had only admitted that inflation would hit double figures.

Rising food prices are responsible for much of the price pressure. Retailers are demanding that producers hold down prices, and in some sectors the government is trying to limit price rises through the use of quotas.

According to Eric Depoy, Midcap Strategist at Alfa-Bank in Moscow, “A lot of this inflation is being imported through food prices driven by the demand for production of bio-fuel, but also by higher milk prices in response to change in consumption patterns in Africa and Asia, as well as the cancellation of export subsidies on milk products from the EU.”

“I'm not sure exactly how the government intend to control these processes although they can implement some kind of domestic price control, at least temporarily,” Depoy believes.