Wednesday July 1, 03:49 PM
UPDATE 1-Russia June inflation steady, rate cuts to continue
By Toni Vorobyova
MOSCOW, July 1 (Reuters) - Russian inflation probably steadied at 0.6 percent in June, data showed on Wednesday, confounding expectations of a fifth monthly fall, but analysts said the central bank was likely to press on
with interest rate cuts.
Consumer prices rose 0.2 percent in the week to June 29, taking inflation for the first 29 days of the month to 0.6 percent, the Federal Statistics Service said.
The central bank and analysts polled by Reuters had expected inflation to ease to 0.5 percent in June from May's 0.6 percent.
Russia hopes lower inflation will let it continue cutting interest rates to promote affordable loans for the real economy which is suffering the first recession in a decade.
Officials have said the benchmark refinancing rate, currently at 11.50 percent after 150 basis points' worth of cuts since April, should be lower than year-on-year inflation.
'The central bank's policy remains focused on economic growth and on activating credit-giving in the banking sector. So I think rate cuts will most likely continue,' said Gintaras Shlizhyus, economist at Raiffeisen Bank in Vienna.
'I don't think this (June) figure will have dramatic consequences ... (But) if in July and August we have some unpleasant surprise on inflation, then possibly the central bank could show some caution.'
Central bank Chairman Sergei Ignatiev said rates may be cut again as early as July.
Georgy Gambarov, deputy head of the bank's open market operations department, said on Wednesday that rates could be cut by a further 150 basis points by the end of the year without creating risks for the economy. But he subsequently clarified that he was only voicing a personal opinion.
Analysts see the refi rate at 10.50 percent by end-2009, and the year's inflation at 11.4 percent.
Prices have risen 7.4 percent since the start of 2009, marking a moderation compared with the same period of last year when they were up 8.7 percent. Keywords: RUSSIA INFLATION/
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