Russian consumer prices grew in January at their fastest monthly pace in three years, data showed on Monday, as New-Year tariff hikes threatened to put this year's 8.5 percent inflation target beyond reach. Prices grew 2.6 percent month-on-month in January, according to the Federal Statistics Service, outpacing the 1.8 percent in January 2004 and above analysts' expectations of a 2.4 percent increase in a Reuters poll.

The chief culprit was services, which soared 8.8 percent after only 1.0 percent in December as 'natural monopoly' charges were jacked up in the New Year.

"It's clearly higher than we expected. And the main reason again is services," said Peter Westin, chief economist at Aton brokerage in Moscow.

With annual inflation running at 12.7 percent, and the government already spending $4 billion to placate pensioners angered by a bungled welfare reform, prices will be hard to bring back under control.

Russia's authorities would have to allow the rouble to rise strongly on foreign exchange markets to do so, said economists.

Copyright Reuters, 2005