September Inflation Surges To 2.0%.

In September consumer price inflation accelerated to 2.0%, posting its highest rate over the last six months. As a result, 9M06 CPI came to 5.9%. Alexander Viktorov: Prices for services (+5.7%), driven by the growth in electricity and gas prices and the seasonal hike for educational services (+15.3%), continued to cause the most inflationary pressure in September. Since the start of the year, prices for services grew by a remarkable 27.4%. Earlier this year, the growth in prices for services was counterbalanced by the decline in prices for food products (-0.4% in 8M06). In September, however, the prices for food items accelerated by 1.1% (-1.2% in August) due to seasonal factors. With price increases for food and continued pressure from service prices expected over the next three months, it is unlikely the government will be able to keep the annual inflation rate under 10%. We have raised our end-2006 CPI rate to 11% from 10%.