The growth in consumer prices in mid-May started to stabilise relative to the strong upward move in the previous months and we are expect more of the same, with uncertainty as to the magnitude of the shock on the pork market being the swing factor. Also, it is too early to cross out the inflationary impact from a weaker rouble, as the FX pass-through is yet to seep into core goods and services.
Thus, for the time being, weekly inflation is driven by meat and meat products (by more than half) and potatoes (by a third), while seasonal deflation is strengthening across such items as eggs, cucumbers and tomatoes (together these components shaved around 0.1pp of the total WoW increase in headline CPI last week). Gasoline and tobacco prices are also rising, but at a significantly slower pace than in March-April, which makes them of secondary importance for the headline inflation.
We expect the full-month increase in consumer prices at 0.7-0.8%, which would likely translate into 7.4-7.5% in YoY terms (vs. 7.3% YoY as of the end of April).
Beyond May, we anticipate the headline CPI to slow down starting July, and to reach 5.3% by the yearend on a new tariff policy, the base effect in food and a negative output gap. We note, though, that the sharper than anticipated shock on the pork market, as well as a poor harvest, present the main upside risks to our year-end forecast.