Last week, the strengthening in daily prices growth resulted in a 6.6% YoY headline CPI increase as of 24 September, the highest reading since November last year. The consumer inflation index is set to increase further, spurred by a combination of the deflation in fruit and vegetables prices gradually fading, the unfavourable base effect for the food component, and persistent upwards pressure on wheat-related goods caused by problems with this year’s harvest.
Thus we are amending our forecast for September up to 0.6% MoM and 6.6% YoY (vs. 0.1% MoM and 5.9% YoY in August), while VTBC core inflation (without food, gasoline and tariffs) is unlikely to provide any surprises this month, staying close to last month’s YoY growth rate, in our opinion. At the same time, Rosstat’s core CPI index is set to accelerate on wheat-related components, which are not excluded from the index.
The strong acceleration in CPI and Rosstat’s core CPI underpins our view that the CBR might hike key rates 25bp again at its October meeting (scheduled for the first ten days next month), despite the ongoing moderation in economic performance.