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Outlook on Russian inflation

Russian inflation has climbed 2.4% in the first month of 2011, with economists warning about the possibility of a return to double digits. Business RT spoke with Aleksandr Morozov, Chief Economist for Russia and CIS at HSBC about inflation.
RT: With inflation growing at such a rapid rate do you think a double digit inflation rate is a risk by the end of the year, and why?AM:  “Well actually it is all pretty much predetermined we will see inflation double digits as soon as the end of this quarter, or the second quarter of this year at the latest. The question is in what direction inflation will go after that. There is a thought that inflation, after reaching double digits will decelerate to single digits by the year end, but there is a growing risk that this might not happen because of price inflation expectations."RT:  And the central bank has decided to keep their refinancing rates and other policy rates unchanged.How long do you think they can resist raising them?AM:  “Well this is a question for the central bank.My personal opinion is that the central bank is what economists say, are staying behind the curve – reacts too passively to growing inflation risks, while overestimating risks to economic growth that we see in Russia." RT:  Oil prices have surpassed the $100/bbl mark, are we headed towards another potential bubble?AM:  “Well if we speak about Russian markets, already economy is getting quite strong momentum, and apparently oil prices above $100/bbl will be stimulating further growth acceleration, so I expect positive surprises for economic performance for the Russian economy for the first and second half of this year.And indeed we may see ourselves in the situation of a bubble or overheating of the economy, and this is another reason to concentrate on inflation risks more than on growth risks.”