The pick-up in Russian inflation over the past couple of months has been driven primarily by a surge in food prices, which should be temporary in nature. Instead, the bigger risk to the inflation outlook remains that the rapid expansion of the monetary base over the past year starts to feed into a rise in consumer and asset prices over the second half of 2011. The policy response, however, is not straightforward and a hike in the benchmark interest rate would be nothing more than a symbolic step.