In Russia, the CPI numbers for May are the top news to watch this week. We start the week with the PMI in manufacturing on Monday, then the regular CPI weekly report on Wednesday which is set to cover the whole of May. In CEMEEA, the top news is the MPC decision on rates in Poland. In terms of data, the PMI estimates will also be available for Poland, Hungary, Turkey and the Czech Republic, while TurkStat is releasing its CPI numbers.
At home, we start the two-week countdown before the members of the CBR board gather to decide on the appropriate key rate (15 June). Against this backdrop, the CPI for May is the last hard number which could produce a measurable impact on the CBR’s projections and, as a result, the speed at which the monetary policy stance normalises. Weak demand, underpinned by contracting real wages and an appreciating RUB, are both producing disinflationary pressure. Based on the regular weekly prints, we estimate the headline CPI growth in May at 15.7-15.8% YoY, with the risks skewed to the downside. The regular weekly CPI report is likely to dot all the i’s on Wednesday, just a day before the full report is made available.
Policy-wise, we expect that front-loaded disinflation, which has admittedly been running ahead of the previously published CBR projections, to feature prominently in the upcoming monetary policy report. A public change of forecasts might provide the opportunity to communicate a further normalisation of monetary policy at the rate set in April, or slightly less.
The PMI figures for manufacturing in Russia diverged markedly in April, with purchase managers reporting slightly improved confidence (up to 48.9, from 48.1 in March) while the Rosstat numbers pointed to a significant retraction of 7.2% YoY. We expect the May PMI print to stay below the 50 mark and think that the risks are skewed to a lower print than a month ago.