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Macro week ahead – CBR to acknowledge rising inflation and remain on hold


The key event this week is the CBR’s Board of Directors meeting, which is to take place on Friday with the press release and updated Monetary policy report to be released at 13.30, Moscow time. Otherwise, Rosstat is due to publish an updated estimate of 2Q15 GDP; this time, the headline figure is to be supplemented with an industry breakdown. On Wednesday, the weekly CPI report is due, highlighting inflation trends in the first week of September. The trade balance for July is scheduled for release on Thursday, while the Ministry of Finance might post its estimate of the budget execution for January-August.

The political agenda is lighter this week after President Vladimir Putin’s visit to China last week and official statements at the Russian Far East Economic forum generated a lot of news flow. We expect MinFin to submit its proposal to extend the deadline for submitting the draft budget to the State Duma.

Otherwise in CEEMEA, Turkey and the Czech Republic are expected to post inflation reports for August.

The downbeat trend on the commodity markets provides further evidence that the terms of trade shock are to weigh on the potential growth of the Russian economy. The resulting exchange rate volatility pushes CPI inflation up; in August it overshot consensus, printing 15.8% YoY. In addition, the fiscal outlook for 2016 is adding uncertainty especially with regards to the indexation public sector wages. As a result, as we argue in our CBR Monetary Policy Preview – Rightly timed pause, published this morning, the CBR is likely to leave the key rate on hold at 11.0% at its BoD meeting on Friday.

The second FX pass-through wave this year has already hit the most sensitive items, pushing foreign tourism down 10% MoM in August. The first weekly report for September is likely to bring the run rate back to the 0.1-0.2% WoW range where it will stay for the remainder of the current year, bringing full year inflation to 12.0-12.5% YoY.

The GDP update is unlikely to bring any major surprises, leaving the estimate of output contraction at -4.6% YoY for 2Q15.

On the political front we look forward to more comments about possible meetings during Putin’s visit to the UN Assembly on 15 September. Elsewhere, we expect MinFin to submit amendments to the budget law, extending the deadline for submitting drafts past 1 October.

Alexander Isakov, Petr Grishin
VTB Capital analysts


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