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Weekly CPI implies that YoY growth slowed to 6.6% YoY as of 8 July


The CBR has just released its weekly CPI report for 2–8 July, which implies a significant moderation in average daily consumer price growth, to 0.022% in 2–8 July from 0.332% to 1 July. The key CPI growth drivers remained electricity and heating, as well as water supply costs, but their contribution to inflation decreased sharply over 2–8 July vs. 1 July. Meanwhile, fruit and vegetable prices stopped growing last week vs. growth of 0.7% WoW a week earlier.

The recent weekly CPI report implies that the second-round effect of tariff increases seems to be mild. According to our calculations, headline CPI YoY growth slid to 6.6% YoY as of 8 July, coinciding with our forecast of full-July monthly inflation at 0.7–0.9% (vs. 1.2% MoM in July 2012) and annual inflation at 6.3–6.5% YoY.

Stalled fruit and vegetable prices provided additional support to our view that the good harvest this year, in combination with the poor harvest last year, will push YoY food price growth down in coming months and thereby contain headline annual CPI growth as well. Given that the currently favourable weather conditions for a good harvest outlook, we are maintaining our CPI forecast of 6.0% YoY at the end of August and of 5.5% YoY at the end of September.

From a monetary policy perspective, the recent inflation data (decline in YoY headline below the 7% mark in June and a continuation of the slowdown in growth of consumer prices in early July despite higher tariff increases this year) reinforced the view that there is no meaningful demand-driven inflation pressure or risks of higher inflation expectations. It therefore also looks highly supportive for our forecast of a 25bp cut in repo rates at the CBR’s decision this Friday.

Maxim Oreshkin, Daria Isakova
VTB Capital analyst


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