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Key events are the CBR’s monetary policy decision and CPI for November

This week, the main event is the regular meeting of the CBR’s Board of Directors on monetary policy. We also have the release of the full-month report on CPI growth in November (due 5-6 December), while on Wednesday there is the release of the services PMI for November, while Rosstat is to release its weekly CPI data. Moreover, the annual dialogue with the Prime Minister is planned on next Friday.

This week brings the CPI release for November, which is the last important report to be taken into account before the CBR’s key rates decision. Given that the recent weekly CPI release implies 0.4% growth in 1-26 November and average daily price growth at 0.015%, we believe that the full-month reading will be at 0.5% MoM and 6.6% YoY, just 0.1pp higher than October’s YoY growth. Besides, it is our view that the coming CPI report is likely to witness the smoothing of the underlying inflation trend. The strong rouble, which has emerged as a result of OFZ liberalization and resilient performance of oil quotes, has likely helped keep inflation pressures muted.

Despite headline CPI remaining higher than mid-term CBR forecast of 5-6% YoY, policymakers might opt to leave interest rates on hold, fearing any move to curb inflation now could stymie economic growth. Therefore, we see a high probability of unchanged key repo rates and a 25bp increase in deposit rates only (to contain rate volatility). Policymakers might also notice concerns over Russia’s economy outlook and signal a pause in monetary policy stance. We then believe that the CBR will in late-1Q12/2Q12, switch to an easing stance.

Among the other important things to watch this week:

Services PMI on 5 December, to give a first estimate of how the sector performed in November.

Weekly CPI will show how sustainable the recent deceleration in daily price growth is, given a recent rebound in fruit and vegetables growth.

On 7 December, Dmitry Medvedev will sum up results of government performance and describe future tasks. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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