Yesterday, Rosstat published the final print of the end-year CPI inflation in 2012. The reading was the second lowest in the post-Soviet period, following the record 6.1% YoY in 2011. The main growth driver in 2012 was the food component, where prices increased 7.5% YoY (compared with just 3.9% YoY in 2011) mainly on the unfavourable base effect. Meanwhile, non-food and service tariff inflation edged lower to 5.2% YoY and 7.3% YoY, respectively (from 6.6% YoY and 8.7% YoY in 2011).
The headline CPI accelerated to 6.6% YoY in 2012, from 6.1% YoY in 2011, mainly driven by the unfavourable base effect and the negative impact of the poor harvest on the food component, while the underlying trend was downwards. Core inflation spiked in mid-2012, but by 4Q12 it had returned to a downward path. Despite the small pick-up in headline CPI in December, and the expected uptick in January, we see inflation pressures remaining weak, eventually dragging headline CPI to 5.4% YoY in 2013. From the CBR’s perspective, the recent reading and expected pick-up in January is unlikely to change the regulator’s ‘wait-and-see’ stance. Moreover, later this year slowing core inflation is likely to give the CBR more confidence to ease monetary policy.
Maxim Oreshkin Daria Isakova
VTB Capital analyst
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