Inflation

3-month seasonally-adjusted core inflation stands at 0.8 percent, which translates as 9.5-10 percent yearly. It was 0.7 percent last month. The C-core rose by 1.7 percent and thus posted 10.3 percent annually.

Inflation looks to be around 10 percent. It could go either way but as demand picks up, the exchange rate passthrough will show its effect, or so I think. I bet for slightly over 10 percent.

This is shored up by the observation that services inflation decelerated whereas goods inflation picked up a bit. Exchange rate effects concern goods more than services.

The main contributions came from transportation and clothing & shoes: 0.48 and 0.43 points respectively, which accounts for 0.91 points out of the 1.36 percent monthly CPI increase.

Food inflation will be crucial in the coming months. Because last summer is full of negative food inflation – minus 1.85 percent in June and 1.39 percent in July, it is hard to beat that up.

In June also we may see an annual increase but for the rest of the summer, base effects are favorable. Because they are unadjusted, head-on figures may fluctuate around 10 percent.

The CBRT estimate looks unrealistic. You can’t have it both ways: either growth will stall for a long time or inflation will surpass 10 percent. Expected real rates are negative.

Secondary market benchmark bond carries 9.27 percent before tax. As I see it, the real rate is a lot deeper in negative territory compared to 0.06 suggested by inflation expectations.