Page 29 - RPTRusFeb17

The disinflation trend in Russia is continuing after CPI was curbed to 5.4% in 2016 . Inflation slightly outperformed the central bank's target of 5.5-6% and more than halved compared with 12.9% year-on-year seen in December 2015.
The decline of y/y inflation in January to 5% was in line with analysts' expectations based on weekly previous weekly data.
In m/m terms food prices remained the main inflationary driver , rising by 0.9%, with both services and core inflation moderating in January to 0.5% and 0.4% m/m, respectively. In y/y terms services and core inflation also declined to 5.5% and 4.4%, respectively, from 6% and 4.9% seen in December.
"While the overall figure is positive per se, the outperformance of food prices is a cause for concern," Alfa Bank warned on February 7, cautious that January's acceleration in food inflation could signal that consumer sentiment is picking up due to continuing growth in salaries and a one-off government payment to pensioners.
Alfa continues to be alarmed by signs of rising poverty levels, noting that "it is not surprising there is a positive uptick in consumption evident only in the food segment" as the "improvement in revenues is taking place against a backdrop of rising poverty levels".
At the same time, recent inflationary pressures such as transportation tariffs hike and higher excise duties on petrol could have not yet fully fed through the inflation numbers in January.
"The significant slowing of inflation to 5.0% YoY suggests that weak consumer demand made a substantial contribution to the existing disinflation trend, offsetting the negative effect of the indexation of certain transportation tariffs and excise duties at the beginning of this year," Gazprombank commented on February 7.
Despite the decline in consumer price growth, the inflation-minded Central Bank of Russia (CBR) is maintaining its cautious monetary policy. The next meetings of the CBR board will take place on March 24, April 28, and June 16.
29 RUSSIA Country Report February 2017 www.intellinews.com