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Russia CPI – August; trade restrictions reverse nascent disinflation trend

In August, headline CPI increased 10bp to 7.6% YoY, as was flagged by the recent weekly inflation prints. Component-wise, the pick-up in food inflation (to 10.3% YoY) on the back of price gains on products that were affected under the recent extension of trade restrictions was the main driver, with meat and fish adding almost 20bp to the acceleration in headline CPI. The slower indexation of regulated tariffs and moderating gasoline inflation helped to dampen to some extent the impact of rising food prices, shaving about 10bp off the headline CPI.
Headline CPI reaccelerated to 7.6% YoY in August after a brief disinflationary spurt ended abruptly in mid-August following the extension of import restrictions on several food categories. The gain in prices on the restricted food items was, hence, the main inflation driver last month, while slower indexation of regulated tariffs helped to dampen the impact. Core inflation in the meantime remained relatively stable in the face of a weaker currency – reflective of subdued local demand growth and the widening output gap in the economy. Looking ahead, food import restrictions will remain the major inflation driver over the next 2-3 quarters, keeping headline CPI elevated around 8.0%, while any additional changes to trade, tax or tariff policies pose additional upside risks.
Daria Isakova, Vladimir Kolychev
VTB Capital analyst


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