CPI takes a nose dive to 7.0% YoY in March
According to Rosstat, CPI was reported at 0.3% MoM and 7.0% YoY in March (from 0.6% MoM and 7.3% YoY in February), below our expectations of 7.2% YoY. The key drags were decelerated food prices (to 8.3% YoY from 8.7% YoY in February) and services tariffs (to 7.9% YoY from 8.2% YoY). Meanwhile, non-food prices remained at 5.2% YoY. Rosstat’s core inflation edged down 0.1pp to 5.6% YoY in March.
Inflation surprised with a sharp deceleration to 0.3% MoM and 7.0% YoY in March. Headline CPI growth declined for the first time since November 2012, and more importantly, core inflation also softened. In our view, the disinflation move in headline CPI looks like a full-blown trend for the upcoming quarters as i) key driving factors are set to disappear; ii) the high base effect will likely contain the increase in food prices; and iii) fragile economic prospects in the medium term imply gradually softer underlying inflation. We are therefore reiterating our 5.4% year-end forecast. In an environment of declining CPI (both headline and core), it will be much harder for the CBR not to decrease repo rates.
Maxim Oreshkin, Daria Isakova
VTB Capital analyst
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