According to Rosstat, CPI was reported at 0.6% MoM and 6.6% YoY in September, up from 0.1% MoM and 5.9% YoY in August and full in line with our expectations of 6.6% YoY. Food inflation shot up to 7.3% YoY (from 6.5% YoY), increasing 0.1% MoM, dragged down by the seasonal deflation in fruit and vegetables. Services tariff inflation advanced notably to 7.3% YoY (from 6.2% YoY), while non-food inflation edged up only moderately to 5.4% YoY (from 5.3% YoY). Rosstat’s core inflation advanced to 5.7% YoY in August, from 5.5% YoY in the previous month.
The recent sharp upwards CPI move was expected due to regulated tariffs being hiked on 1 September. To recap, during the first three days of September consumer prices surged 0.16%. We also note that VTBC core inflation (CPI excluding food, gasoline and regulated services) ticked up to 5.6% YoY from about 5.5% YoY over the four previous months. The annualised SA MoM growth of our core inflation index over the past several months has run closer to 7.0%, significantly exceeding the target for core CPI of 5.5% YoY for this year and 5.7% YoY for 2013. Hence, given that accelerating inflation is underpinning the CBR’s recent hawkishness, we expect the regulator to hike the deposit rate 25bp this Friday, and then raise all key rates 25bp by the end of the year.
Maxim Oreshkin, Daria Isakova
VTB Capital analyst
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