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CPI intensified to 7.4% YoY in May

According to Rosstat, CPI was reported at 0.7% MoM and 7.4% YoY in May (from 0.5% MoM and 7.2% YoY in April), above both our and market expectations. The key growth driver was the acceleration in the prices for food (to 9.2% YoY, the highest level since July 2011, from 8.8% YoY in April) and transport (to 10.6% YoY from 9.0% YoY). Meanwhile, non-food prices continued to slow, down 0.1pp to 5.0% YoY. Rosstat’s core inflation edged up to 5.9% YoY, from 5.7% in April, to hit a 16-month high.
Headline CPI reached a 2013 high in May, mainly driven by an acceleration in fruit and vegetable prices (which came earlier than in 2012) and a pick-up in railway transportation tariffs. Meanwhile, YoY VTBC core inflation stabilised, despite unfavourable rouble dynamics. The CPI report reduces the likelihood of the CBR making short-term repo rate cuts on 10 June. However, we still expect a forward-looking decision from the regulator, as the return of headline inflation to the forecasted range looks like a done deal in the coming months.
Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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