This short week brings the first economic data points for April, including the monthly CPI report (Rosstat is due to release it on 7-8 May, after its regular weekly CPI report, which is due today), the Services PMI (7 May) and railway cargo turnover data. In addition, on Tuesday President Vladimir Putin is to hold a meeting on the one-year execution of his ‘strategic’ decrees, which were signed right after his inauguration.
There is also the possibility that the regular meeting of the CBR’s Board of Directors on monetary policy will be held this week, as the official guidance implies any working day between 6-15 May.
The full-month CPI report is likely to reveal a dichotomy in headline and core inflation measures: while the former picked up a bit on the earlier acceleration in vegetable prices (according to the recent weekly CPI reports), the latter is likely to remain subdued. Hence, we expect a 0.5% MoM and a 7.1% YoY increase in the consumer price index for April, mainly on the back of the growth in vegetable prices. The pickup in the latter, which has come earlier than last year, will likely result in a favourable base effect and a more rapid decline in the headline CPI in May-June.
At the meeting about Putin's May decrees, we expect the review of what has been achieved to touch not only on quantitative results (some of which have been leaked into the media) but also on what progress has been made in qualitative terms.
For the CBR meeting, we still expect a 25bp cut in all policy rates on the back of the economy’s poor performance and the ongoing slowdown in core inflation, despite some increase in the headline CPI. The rebound in the economy data for April and still low unemployment might mean that any cut in the auctioned repo rate is postponed until June. In that scenario, we are likely to see three cuts in a row during the summer months.