According to Rosstat, CPI increased 0.12% during 1-13 August with almost zero growth last week, bringing YoY growth to 5.8%. On 7-13 August, average daily price growth halved to 0.006% from 0.012% in the previous week (the same week of last year registered deflation of 0.005%). The key movers in CPI were balanced on 7- 13 August: on the one hand, flour, bread, and chicken added to CPI growth (+1.3% WoW, +0.7% WoW, and +0.9% WoW accordingly), while on the other, we saw deflation in fruit and vegetables at an average of 3% WoW (in particular, potato prices were down 4.5% WoW).
The recent slowdown in CPI growth was seasonally expected; however, this year we have been seeing much softer fruit and vegetables deflation as compared with the -4.5-5.5% WoW readings last year. At the same time, global and local problems with the harvest are spurring inflation via higher wheat-product prices.
We reiterate our forecast of 0.2% MoM and 6.0-6.1% YoY increases in consumer prices in August (which matches/exceeds the regulator’s upper inflation target boundary for 2012) and as a result, coupled with a more hawkish statement in August, we still expect to see a 25bp hike in key monetary policy rates at the CBR’s September meeting.