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Macro week ahead


This week, Hungary and the Czech Republic are scheduled to release their CPI data for June. In Russia, Rosstat is to publish its weekly CPI estimate (for 1–7 July), the AEB is to present June car sales data and the Ministry of Finance is to release budget execution numbers for last month. In addition, the delayed 2Q14 BoP report is likely soon in Russia.

The June inflation statistics in Hungary and the Czech Republic are unlikely to surprise the market, which expects -0.1% and +0.1% in YoY terms, respectively. For Hungary, although the recent YoY deflation resulted partly from cuts to regulated energy prices, the MPC acknowledged benign imported inflation, tempered wage inflation and increasingly subdued inflation expectations in general and noted that inflation could remain below the target of 3.0% (it cut the average FY14 forecast for CPI growth to zero from 0.7%, and FY15 to 2.5% from 3.0%). In the Czech Republic a combination of factors including sluggish wage growth and a moderation of food and fuel prices on the global markets is to keep inflation below the 2% target this year. An ultra-low inflation environment is supportive for accommodative monetary policy to last for longer, especially given the big picture of growing deflation risks in the Eurozone and a supportive June rate cut by the ECB.

In Russia, further slackening car sales will likely signal continuously cooling momentum in private consumption and highlight the inevitable adjustment on the production side that has been on the upturn recently. The rouble strengthening in 2Q14 might become clearer with the first estimate of BoP and we expect to see much milder net FX purchases by both households and corporates. On the inflation front, the first week of July is critical, as it is to mark the start of strong disinflation. To remind, on 1 July regulated tariffs for households are to be hiked 4.6% (0.7*6.5%) vs. around 10–15% last year, as a result the headline inflation might lose 0.6pp.

Vladimir Kolychev, Daria Isakova
VTB Capital analyst

CPI, Russia

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