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CPI surged to 6.6% YoY for 1-24 September

According to Rosstat, CPI growth reached 0.48% during 1-24 September (vs. - 0.1% for 1-26 September 2011). Over 18-24 September, the average daily price growth accelerated to 0.018% (translates to +0.12% per reported week) from 0.014% during the previous week (20-26 September last year saw inflation of 0.001%), with the key driving forces almost unchanged: eggs (+2.1% WoW), flour (+1.5% WoW), oil (+0.9% WoW), chicken (+0.8% WoW), bread (+0.5% WoW) and the regulated tariff increase (public services (+0.3% WoW), water supply (cold at +0.2% WoW and hot at +0.5% WoW), and central heating (+0.5% WoW)). In addition, gasoline prices kept rising, up 0.7% WoW, while fruit and vegetables deflation weakened to -2.5% WoW, from -3.0% WoW in the previous week.

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. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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