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CPI stayed 6.8% YoY as of 15 October

According to Rosstat, the CPI increased 0.33% during the first half of October and added 0.13% last week. The average daily price growth slowed to 0.019% during the reported period (9-15 October) from 0.028% in the previous week, but was higher than the 0.015% in 11-17 October last year. The detailed breakdown shows that the main growth drivers were flour (+1.4% WoW), oil (+1.1% WoW), eggs (+0.8% WoW) and millet (+0.8% WoW). Meanwhile, the growth in gasoline prices decelerated to 0.6% WoW, from 0.8% WoW during the previous week, and fruit and vegetables deflation weakened further to -1.2% WoW, from -2.0% WoW over the past few weeks.
After the surprisingly strong growth last week, CPI dynamics cooled a bit with daily growth rates coming closer to last year’s level. Despite the 6.8% YoY growth as of 15 October, we retain our full-month CPI forecast for October at 0.7% MoM and 6.8% YoY, but see some risks of it ticking higher. In the coming weeks, lower deflation in fruit and vegetables as well as steady underlying inflation pressures could spur daily CPI growth rates. However, last year’s base is also high, meaning little potential for YoY growth to accelerate in the next couple of weeks. A deceleration in daily growth, coupled with the rather weak statistical report for September (released by Rosstat yesterday), increases the chances of the CBR taking a ‘no hike’ decision in November. Next week’s CPI dynamics could be crucial.
Maxim Oreshkin, Daria Isakova, Mykyta Mykhaylychenko, Dmitri Fedotkin
VTB Capital analyst

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