Page 32 - RUSRptOct18

September 2017. However, its still remained close to post-Soviet record-lows.
Inflationary expectations, also closely watched by the regulator, also inched up by 0.2pp to 9.9%, the highest since 2017. Expectations of higher prices grew due to weaker ruble and planned VAT hike in 2019 , according to the CBR's survey.
4.2.1 CPI dynamics
After almost a year of sub-3% growth, consumer prices were back to 3.1% y/y, up from 2.5% y/y for July. VTB Capital (VTBC) said in a note that the acceleration was foremost driven by food (+0.56pp out of the total 0.6pp).
“That is no surprise, given the low base of August 2017 created by the shifted harvesting in fruits & vegetables. Inflationary pressures from other food items (meat, poultry, macaroni and grain) continued to mount too, reflecting the recent uptick in grain prices and FX. The run rate was back to +0.5% m/m SA, after a setback in July,” VTBC said.
Food inflation is up on fruits & vegetables and meat prices. In August, food inflation sped up to 1.9% y/y, from 0.5% y/y in July. While the bulk of the acceleration was due to fruits & vegetables prices, other food items contributed too. In particular, the prices of meat & poultry were up 3.0% y/y, from 1.4% y/y previously. We believe the main reason behind that was growing wheat prices.
Meat inflation has been sliding since February 2017 . In some months, the disinflation was so dramatic that it explained more than half the total slowdown in consumer price growth. VBTC has argued that low inflation is due to i) the high base effect, ii) rouble strength and iii) good harvests in 2016-17 were bringing meat prices down. However, all these factors have currently turned around.
32 RUSSIA Country Report October 2018 www.intellinews.com