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Macro week ahead – weekly CPI Russia


Data flow in Russia this week is limited to the regular CPI report. Elsewhere in CEEMEA, all eyes are on the MPC decisions in Hungary (24 March), the Czech Republic (26 March) and South Africa (26 March).

In Russia, the CPI has recently shown strong signs of stabilisation, as evidenced by the headline figure levelling off at 16.7% YoY for three consecutive weeks. As the residual pass through wears off, we expect the CPI run rate to stay at 0.2% WoW, which will likely result in the full-March CPI posting 17.0% YoY or slightly less. We stick to our call for a front-loaded path of disinflation which has recently been strongly supported by incoming data. In terms of policy, if front-loaded disinflation is supported by the monthly print, that could send a strong signal for a matching front-loaded path of interest rates normalisation.

Elsewhere in CEEMEA, we and the Bloomberg-reported consensus expect varying stances of monetary policy in three decisions due this week. In Hungary, the appreciation of the forint, negative headline inflation (-1.0 YoY in February), subdued measures of underlying inflation and low import inflation from major trading partners all point to downward risks to the 3.0% inflation target. Adding to the fundamentals is the dovish signal from the MPC, underscoring the threat posed to the target, and we expect the decision to deliver a cut of 20bp from the current 2.1% base rate. The Czech National Bank is dealing with a different phase of the easing cycle, with not much room left for further rate cuts. We expect the easing to be reflected mainly in the tone of the press release, with actual changes to the foreign exchange and interest rate policy deferred until the next meeting. South Africa is likely to take a pause and leave the repo rate at 5.75% at this meeting, while the MPC’s attention will likely be focused on ZAR weakness, underpinned by the terms of trade deterioration and USD appreciation.

Vladimir Kolychev, Alexander Isakov
VTB Capital analysts


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