The spike in inflation on 1 July 2013 was driven by the annual hike in regulated tariffs, and so was widely expected (early July 2012 consumer prices added 0.54%).
According to our calculations, headline CPI ended June at 6.9% YoY and stayed near this level on 1 July, meaning it has not exceeded 7% (the important mark for the CBR’s monetary decision in July). We believe that today's monthly CPI report for June will be crucial for the next policy meeting. A headline reading below 7% would be a signal for policymakers to opt for cuts across all policy rates at the next CBR policy meeting (which is to be chaired by Elvira Nabiullina for the first time).
As far as our outlook for the full-month July CPI is concerned, given the i) forthcoming second-round effects from the recent increase in tariffs; ii) favourable base effect in food prices (this year’s harvest seems to be good or even strong); and iii) no hike in minimum vodka prices, we expect full-July monthly inflation at 0.7-0.9% (vs. 1.2% MoM in July 2012). That would imply annual price growth slowing visibly to 6.3-6.5% YoY by the end of this month.