OREANDA-NEWS. August 06, 2010. Russian CPI was reported by Rosstat at 0.4% MoM in July, reaching 5.5% in YoY terms, down from 5.8% a month ago. On a weekly basis, CPI was again posted at 0.1% for the week ending August 2, reported the press-centre of OTKRITIE Financial Corporation.

View: While disinflation continued in July, bringing the YoY figure to a historic low, we believe this will be the last month to see a decreasing inflation rate. Starting last August Russia enjoyed three months of zero inflation, which we believe will not be repeated this year. First, M2 has demonstrated positive YoY growth since last September, and for half a year has been growing at around 30% YoY.

Second, with the acceleration in imports and the current account shrinking the ruble appreciation potential is limited, which means it will no longer contribute to disinflation. Additionally, PPI at 9.8% YoY in June will put pressure on consumer prices. And last, but not least, the harvest damaged by the drought and the fires is affecting inflation both directly (which we believe could be minimized through state interventions) and through a heating up of inflation expectations. Our year-end forecast remains unchanged at 7.5%.