Rosstat’s estimate of the weekly inflation for 8-14 September is 0.12%, slightly lower than the 0.16% in its previous report. Headline inflation is sticky at 15.8% YoY, where it has been since the end of August. The average daily inflation is stable at 0.02%, but that is twice as much as we saw in the August statistics. Rosstat reports that the deflation in fruits and vegetables was deeper, at -1.2% WoW, than in the first week of September (-0.9%). This contribution partially outweighed the increased inflation in eggs, sunflower oil and confectionery, where prices were up 1.3%, 1.2% and 0.5% respectively. Deflation continues to be mostly driven by the solid supply of carrots, potatoes and cabbages, where prices dropped in the range of 3-5% WoW.
The inflation pattern in recent weeks is typical for late summer-early autumn. Residual food deflation is gradually fading away while particular items are already pushing inflation higher. For instance, cucumbers and tomatoes gained 6.7% and 3.2% during the first two weeks of September. It also worth noting the 0.1% WoW price decline in granulated sugar, after the high and persistent price growth since August. This matches the call we made based on expectations of rising supply in early September.
Our base case scenario is for the CBR to keep its key interest rate on hold at the October meeting and to look at the balance between inflation and growth developments for now. Although the 0.12% WoW print is moderately positive, we believe the sequential weekly number will be around 0.2% in late September-October. Thus, inflation prospects are likely to add further arguments for the CBR to stay on hold at the next meeting.