According to Rosstat, CPI added 0.004% on 1 October, which implies a significantly lower daily growth pace than was the case between 18-24 September (0.018%), but still higher than the 0% average daily growth during 1-3 October last year. The key growth drivers were almost unchanged: eggs (+1.2% WoW), flour (+0.9% WoW), oil (+0.9% WoW), chicken (+0.4% WoW), bread (+0.5% WoW) and the regulated tariff increase (public transport (+0.3% WoW), water supply (cold at +0.6% WoW and hot at +1.0% WoW), and central heating (+0.5% WoW)). In addition, gasoline prices continued to rise, up 0.7% WoW, while fruit and vegetables deflation weakened to -2.0% WoW, from -2.5 WoW in the previous week.
A detailed breakdown reveals that a decelerating daily growth pace of CPI was mainly caused by a slower increase in wheat-related products and the milder effect of tariffs hikes. We reiterate our forecast for September CPI growth of 0.6% MoM and 6.6% YoY (vs. 0.1% MoM and 5.9% YoY in August) and expect that even the recent upwardly revised CBR estimate of headline CPI for this year of 6.3-6.4% YoY is too low and see CPI accelerating further towards 7.3% YoY by end-2012. Hence, the continuing pressures from CPI and Rosstat’s core CPI (as the latter contains products that depend on the wheat price) underpins our view that the CBR might, after a pause, hike key rates 25bp again in 4Q12 at its next meeting scheduled for 5 October despite the ongoing moderation in economic performance.
Maxim Oreshkin, Daria Isakova
VTB Capital analyst
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