Sat, Dec 13, 2014 - Page 15 News List

Russia inspects bread prices to prevent hikes

AFP, MOSCOW

Russian communist party activists dressed as a US policeman symbolizing the US dollar and others in striped robes with posters that read “sanctions” symbolizing Russian rubles hold a rally in Moscow last Saturday. The Russian economy is hurting from low oil prices, sanctions and geopolitical tensions.

Photo: EPA

Russia said on Thursday it would launch price inspections following media reports the baking industry plans to increase bread prices by 10 percent as inflation and Western sanctions rattle the nation.

“Taking into account the regional nature of the [bread] market, the Federal Anti-monopoly Service has tasked its local offices with carrying out price checks,” competition authority official Anna Mirochinenko told Russia’s state-run TASS news agency.

She added that 500 bread factories and 50 flour mills in nine Russian regions would be targeted by the inspections.

The announcement came after Russian daily Kommersant — based on distributers’ claims — reported on Thursday that bread prices could jump by 10 percent in coming weeks, despite Russia’s bumper harvest this year, which produced 100 million tonnes of grain.

Bread producers justified the coming price jump by citing an increase in the cost of imported raw materials, but also packaging and transportation.

While inflation has shot up due to the tumbling the value of the ruble and an embargo on Western food imports, authorities in Russia have promised to crack down on any price gouging.

The Russian ruble fell in early trade yesterday, hitting a new historical low of below 57 against the US dollar after a rate increase by the central bank failed to support the Russian currency.

At 7:30 GMT, the Russian currency was 0.68 percent weaker against the US dollar at 56.83 rubles and down 0.72 percent to trade at 70.40 rubles versus the euro. Russia’s stock market indices also dropped, following weaker oil prices.

The ruble has lost more than 40 percent since the beginning of the year, weakened by a slide in oil prices and general risk aversion to Russian assets that has been fueled by Moscow’s standoff with the West over its role in the Ukraine crisis.

Russia’s central bank raised its main lending rate by 1 percentage point on Thursday, but failed to stop the ruble’s slide or lift the gloom over the economy.

On Thursday the Bank of Russia raised the interest rate for the fifth time this year to 10.5 percent from 9.5 percent. The interest rate was 5.5 percent at the beginning of the year.

The foreign exchange market reacted with disappointment, seeing the rate increase as not enough, Alfa Bank analysts said.

“The market is mainly being driven by the disappointment of what is viewed as overly conservative action on the part of the central bank of Russia in hiking the key rate only 100 basis points,” Alfa Bank said in a research note yesterday.

The interest rate rise is intended to make the ruble give better yields to savers and fight inflation, which the central bank predicts will hit 10 percent by the end of the year.

Additional reporting by Reuters

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