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Russia's September CPI jumps to 8% - ING

FXStreet (Łódź) - According to Dmitry Polevoy from ING, the food imports ban imposed on Russia by the West and the RUB pass-through pushed Russian inflation in September to a three year high of 8% on an annual basis and to 7% month-on-month.

Key quotes

"All in all, the faster rise in inflation than we initially projected looks a negative surprise, even though we still think that the threat on the food side is unlikely to last much longer than in 4Q14-1H15, especially given the harvest conditions are expected to be strong now and global commodities prices provides a non-inflationary backdrop."

"The behaviour in non-food prices recalls a risk of reignited RUB pass-through effects, which are likely only to intensify in the next 3 to 6 months."

"Only weakening consumer demand, which we expect may drop to zero or become even negative in late-2014 or, more likely, in 2015, will act as a partial disinflation factor."

"Overall, we don’t think the negative surprise in inflation will turn the CBR back to a more hawkish rhetoric: we have already heard from the regulator that it saw the food price move as a transitory shock still allowing MT/LT targets to be met."

"We thus stick to our base-case view of no policy rate changes before 2014-end or in 1H15."

"Only a further significant RUB depreciation from the already weak levels may force the CBR to act."

"But in this respect, in addition to the recent confirmations (from the President and CBR officials) on no plans to use capital controls, the announced promise to launch an FX repo facility for banks may be a substitute for a higher policy rate at the moment to alleviate the strain on the FX market."

"The next policy meeting is due on 31 October, so still plenty of time for any surprises that may affect the CBR decision."

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