Inflation hasn’t peaked in yet (+16.9% y-o-y in March)
Rosstat published monthly CPI data for March. Headline figure came at +16.9% y-o-y (+1.2% m-o-m) compared to +16.7% y-o-y (+2.2% m-o-m) in February. Russian CPI by major groups, January 2012 - March 2015 While the slowdown in monthly rates is apparent, it hasn’t yet peaked in y-o-y terms. Based on weekly series with limited sampling it was expected that inflation will peak in February and there would be decline in y-o-y growth rates in March. Last week Minister Ulyukaev expressed similar expectations. But it didn’t happen yet. Food inflation stabilized (+23.1% y-o-y after 23.1% in February) but non-food products continue to rise in price (+14.6% y-o-y after 13.7% in February). Effects of December-January RUB depreciation haven’t yet passed through. For example, there was strong rise in medicine prices (+2.1% m-o-m) in March. Rapid decline in in inflation is expected in 2H2015 due to ‘base effect’ and FX pass-through exhaustion (due to finite lags and recent RUB appreciation). A lot will depend on decisions about regulated price increases scheduled for July. Currently official forecasts assume that regulated tariffs will be increased by no more than last September inflation forecast, i.e. by no more than 7.5%. But companies lobby for higher increases. We expect headline CPI to peak in April-May at 17.3-17.6% y-o-y and decline to 12-13% by December (assuming that decisions on regulated prices will be not reconsidered).