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Headline CPI slowed to 6.5% YoY

According to Rosstat, headline CPI growth decreased 0.4pp to 6.5% YoY in July (6.9% YoY in June), one notch higher than our forecast and fully in line with the Bloomberg consensus. The key factors were a deceleration in food CPI (to 6.8% YoY, the lowest this year) and the slowing growth in core prices (non-food exgasoline decelerated 0.2pp to 4.6% YoY). Service prices growth accelerated 0.4pp to 8.4% YoY on the back of the stronger regulated tariffs hike this year. Excluding regulated prices, services CPI growth decelerated 0.1pp to 6.4% YoY. VTBC core inflation edged down a notch to 4.8% YoY, while Rosstat’s core inflation edged down two notches to 5.6% YoY.
Headline CPI has continued its downward trend and reached 6.5% YoY. A detailed look into the report shows that besides the expected slowdown of food CPI growth, disinflation on the VTBC core level has accelerated in recent months, highlighting the weakness in internal demand. This is happening even in the environment of a weak RUB. Until recently, the slowdown in food CPI growth was mainly driven by the base effect; the impact of this year’s harvest on prices is still to come. Together with the recent weak economic data, in our view the report highlights that the CBR is behind the curve with delayed monetary policy easing.
Maxim Oreshkin, Daria Isakova
VTB Capital analyst

CPI, gasoline, ruble, CBR

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