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CPI declined 0.5pp to 6.9% YoY in June, dragged by food

According to Rosstat, headline CPI growth decreased sharply to 0.4% MoM and 6.9% YoY in June (from 0.7% MoM and 7.4% YoY in May), fully in line with our forecast and one notch lower than the Bloomberg consensus. The key factors were the deceleration in food CPI (to 8.0% YoY, the lowest level this year, from 9.2% YoY in May) and persistently slowing growth in non-food prices (last month they were down another 0.1pp to 4.9% YoY). Rosstat’s core inflation edged down a notch to 5.8% YoY.
Last month's sharp decline in the headline CPI to below the 7% mark came mainly on the favourable base effect in food prices, with core inflation also softening despite recent RUB weakness. Early July inflation data confirms the disinflation trend, so we are comfortable with our YE13 forecast of 5.4% YoY for headline CPI. The June report also shows no meaningful demand-driven inflation pressure. Taken together with expectations of further disinflation in the coming months and the weak economy, this opens the way, in our view, for a repo rate cut at the monetary policy meeting in July. For more details, see our Russia CPI - June; long-awaited disinflation kicked off, published yesterday.
Maxim Oreshkin, Daria Isakova
VTB Capital analyst

CPI, Russia

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