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Weekly CPI – inflation creeps up to this year's high of 7.8%

Rosstat reports that CPI added 0.32% over 1-15 September, with the average daily inflation ticking down a bit to 0.020% during 9-15 September vs. 0.022% in the previous week. Component-wise, the increases in the prices of cucumbers (4.4% WoW), gasoline (0.3%), tomatoes (2.8%), pork (0.8%) and chicken (0.6%), as well as meat-related goods and eggs, were the key inflation drivers last week, while the deflation in vegetables kept softening (to -0.4%).
Annual inflation has firmly followed an upward track and last week added another 10bp to 7.8% as of 15 September. The pace of acceleration is faster than we expected and by the end of this month the headline CPI growth might achieve 8.0% YoY (if the average daily inflation continues to be at 0.020%). The import ban is the key driver for the time being: the pass-through from it into the headline YoY increase has reached around 0.2pp, mainly in the meat-related categories. Nevertheless, the middle of September is showing some positive developments across food CPI items which are included into an embargo list: the normalisation in chicken prices and even seasonal deflation in apples. However, the latter means there is little to be upbeat about in terms of the YoY print, which continues to edge up and hit just shy of 4% (calculated on the weekly data) as last year apple prices saw much stronger deflation.
From the policy perspective, the regulator expressed tolerance towards the ongoing acceleration in inflation thanks to its temporal nature. However, rate hikes are still possible, we believe, if the regional sales tax is imposed. The final decision on the tax policy might be taken already this week.
Vladimir Kolychev Daria Isakova
VTB Capital analyst

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