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Macro week ahead – CPI unlikely to provide dovish arguments in week prior to CBR BoD meeting


Autumn sets off with PMI in manufacturing across CEEMEA due out for release on Tuesday. Rosstat is to publish its weekly inflation numbers on Wednesday that cover the whole of August, and a more complete monthly CPI report is due on Friday. Besides that, early economic activity indicators are expected, including rail cargo turnover, electricity output and consumption etc. The political agenda will be dominated by the visit of President Vladimir Putin to China on 2-3 September. The Russian President will participate in the commemoration of the 70th anniversary of the end of World War II on the Asian front. In CEEMEA, the Polish MPC is set to meet on Wednesday and Turkey is expected to publish its CPI report for August on Thursday.

On the inflation front, we believe the weekly report is likely to provide another 0.1% WoW print, bringing total monthly price growth to 0.2% MoM. This is in line with Aug-14 inflation of 0.2% MoM, which means that the headline CPI will stall at 15.6% YoY for the second month. The risks this time around are skewed to the upside, as weekly reports provide the lower bound of the final figure due to overrepresentation of the food category, which was seasonally supported, while FX weakness might have pushed the prices higher in the non-food category and tourism section of non-regulated services. On balance, the inflation outlook is not supportive for a September rate cut, as the CBR’s BoD is likely to wait for more data to better gauge inflationary risks from the recent RUB volatility.

The presidential visit to Beijing is expected to put economic issues on the agenda, including a discussion of the interim results of the investment contracts signed in May during the visit of President Xi to Moscow and the possibility of widening the scope and scale of Russian agricultural exports to China, including grain, pork and beef.

In CEEMEA, the NBP is expected to keep rates on hold, in line with Bloomberg-compiled consensus, as inflation risks remain subdued (with deflation in July of -0.7 YoY), while external risks to the growth outlook have resurfaced with a potential slowdown of Chinese economy and lower commodity prices, which are weighing on inflation.

Alexander Isakov, Petr Grishin
VTB Capital analysts


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