This week, the main event is the full-month report on CPI growth in February (due 5–6 March). Also, possibly this week or next, there is the regular meeting of the CBR’s Board of Directors on monetary policy. We also note Tuesday’s release of the services PMI for February. Moreover, Rosstat is to release its weekly CPI data on Wednesday.
The CPI release for February 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 0.5% growth for 1–25 February, we believe that the full-month reading will be 0.5% MoM and 7.2% YoY, just 0.1pp higher than January’s YoY growth. In our view, February’s reading will mark the maximum level for CPI growth this year. Besides that, core inflation has been on a firm downward trend for several months already, and we expect it to continue.
As headline CPI remains higher than the medium-term CBR forecast of 5–6% YoY, policymakers will likely leave interest rates on hold, given that any move to support economic growth now could spur inflation expectations. However, given the pick-up in the unemployment rate (after falling for several quarters), the still slow demand and even contracted IP growth, policymakers will likely switch to a more doveish tone and explicitly signal increasing risks to economic growth. Sergey Ignatiev has recently said that once headline CPI turns the corner, the regulator might undertake a rate cut. We believe that the CBR will start easing in April.
Among the other important things to watch this week:
- Services PMI on 5 March, to give a first estimate of how the sector performed last month.
- Weekly CPI will likely show that the surprise acceleration in daily price growth last week was a one-off.
Maxim Oreshkin, Daria Isakova
VTB Capital analyst
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