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Macro week ahead – weekly CPI from Russia


In Russia today, the market reaction to the Moody's Ba1 downgrade is to be in the spotlight. The economic projections that underlie the cut differ substantially from our own baseline and include rather extreme assumptions on capital outflows (in excess of USD 200bn in 2015). We expect a moderate market reaction as the decision did not really come as a surprise, with the initial likely response being RUB losing some of the strength it accumulated last week.

The last week of winter is likely to be light in terms of economic data releases. The only interesting publication is the weekly CPI reading, which we expect to bring more evidence of a further normalisation in the weekly price growth across the board that started two weeks ago. If price growth stabilised at or below 0.4% WoW, we would expect the monthly headline CPI to tick up to 16.2-16.3% YoY in February.

While the week is set to be rather light in terms of data in Russia, elsewhere in CEMEEA two central banks are to decide on interest rates on Tuesday: in Hungary, the central bank is to remain on hold (we assign a non-negligible probability of a 10bp cut). One of the significant factors that increases the probability of an earlier than expected cut is recent Forint strength, which has appreciated 5.5% YTD as inflation hit record lows, printing -1.4% YoY in January.

Vladimir Kolychev, Alexander Isakov
VTB Capital analysts


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