Russian inflation seen around 8.0-8.6%oya in 2Q-3Q16 on weaker RUB

Russia's inflation regained momentum in November-December, with core inflation slowing to 0.5-0.6%m/m S.A from 0.7-1.0% in August-September. However, with the base line effects, analysts expect inflation to decline substantially in the coming months to around 8.4%oya and 7.3% in March and December respectively. Inflation is expected to remain above the central banks previous forecast of 7.5-8% for March-16 and 5.5-6.5% for Dec-16.

Trend inflation fell to 11.5%oya in June, before rising to 11.9% in August-November and the central bank expects a gradual drop in the trend inflation in the forthcoming months.

Household sector inflation expectations were raised by currency weakness. The CBR report recommends that 12-month-ahead household inflation expectations are increased to 14.7% in September from 11.9% in May, before easing to 13.7% in October and 13.0% in December.

"Consensus expectations deteriorated in recent months, with weaker RUB expected to keep inflation around 8.0-8.6%oya in 2Q-3Q16 vs. 7.0- 7.5% previously" - JP Morgan