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CPI reached 7.2% YoY as of Monday


According to Rosstat, CPI growth edged up to 0.16% for 19-25 February, from 0.10% the week before (bringing the YTD print to 1.5%). Over the reported period, average daily price growth increased to 0.023%, from 0.014% in the previous week (exceeding the 0.009% for 21-27 February 2012). The key driving forces behind CPI growth remained almost the same (in order of importance): vodka (+0.6% WoW), potatoes (+0.7% WoW), gasoline (+0.1% WoW), and wheat bread (+0.4% WoW).

Meanwhile, fruit and vegetable prices decelerated slightly, adding 0.3% WoW vs. 0.5% during the previous week.

It is worth noting that chicken prices kept deflating (-0.5% WoW). 

The reading implies that headline CPI edged up 0.1pp to 7.2% YoY as of 25 February. The acceleration in daily price growth was rather surprising, given that the vodka and fruit & vegetables prices continued slowing last week. We are waiting for the full month report (due on 5-6 March) to get a better understanding of CPI components. However, for now we are retaining our forecast for February of 0.5% MoM and 7.2% YoY (vs. 1.0% MoM and 7.1% YoY in January).

In our view, February's data will likely mark the highest point in CPI YoY growth this year. This could open the way for a start to the monetary policy easing cycle (we expect more dovish comments at the March meeting and the first cut in April). Meanwhile, the downward trend in core inflation could well persist, in our view, and therefore we see headline CPI slowing towards 5.3% YoY eop-FY13 (under a USD 110/bbl scenario). 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

CPI, gasoline, dollar

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