The recent sharp upwards CPI move did not come as a surprise given that a marked hike in regulated minimum vodka prices was scheduled for early January. Moreover, weekly CPI data is calculated on a short list of products and omits tobacco and railage, which are only included in the complete monthly reports. However, tobacco and railage likely also significantly spurred the headline consumer price index in the first days of this year given the announced increase in excise on tobacco and tariffs for railway services. Hence, we might see full-January CPI at around 0.9% MoM and 7.0% YoY (vs. 0.5% MoM and 6.6% YoY in December).
We believe that while core inflation will persist on its downwards trend, which began in 4Q12, headline CPI will slow towards 5.4% YoY eop-FY13. From the CBR’s perspective, policy makers expected a spike in prices in January and therefore the recent move in CPI is unlikely to influence the regulator’s ‘wait-and-see’ stance. We do not think the CBR will make any changes to key policy rates at the next monetary policy meeting (due on 15 January).