Russian inflation begins deceleration

Russian inflation decelerated to 15.0 % yoy in the month of November, from 15.6% yoy of the previous month. This is modestly below the consensus expectations.

While there is decline in inflation, the monthly level at 0.8% mom is still higher, almost equal to the annualized inflation. This wont be bringing the inflation to a reasonable range of target, as CBR noted.

While the food inflation is falling, there is acceleration in other goods. As the base effect doubles in December, the rate of decline will pick up considerably and when the headline inflation drops.

"The base effects triple in January, and we expect inflation to decline to about 10% y/y. An unknown factor that could hold back some of the declines in inflation is oil price and its effect on the RUB", says Barclays in a research note. 

Turkeys latest sanctions on the fruit and vegetable imports will increase the food prices. The inflation is still considerably higher than CBR key rate at 11%. CBR is likely to begin easing with declining inflation.