September CPI reaches 3-year maximum; RUB at new lows

RUSSIA ENERGY / FINANCE - In Brief 06 Oct 2014 by Marcel Salikhov

September CPI data confirmed growing inflationary pressures due to restrictions on food imports from Western countries since August. Headline number is at +8.0% y-o-y, highest number since August 2011. Food inflation reached +11.3% y-o-y, highest number since June 2011. Official core CPI is at +8.2% y-o-y. Major contribution to growing inflation came from food imports affected by the import ban: meat (+2.9% m-o-m, +16.8% y-o-y), fish and seafood (+1.9% m-o-m, +16.8% y-o-y), milk and dairy products (+0.8% m-o-m, +16.2%). Next meeting of CBR’s Board will be held at October 31st, before October inflation data will be available. After September meeting the Boars expressed its belief in short-term nature of current inflationary shock that shouldn’t be ‘targeted’ by monetary policy tools. But falling RUB is another source of inflationary pressure. As spring period of RUB weakness showed, exchange rate pass-through effect is still strong in Russian economy. So RUB at historical lows will definitely add to inflation even with economic stagnation. We think that in current circumstances CBR will have increase key rate in order to stabilize FX market and show commitment to inflation targeting goals.

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