Headline CPI increased 0.20% mom in April, above market consensus of 0.18% (as per Bloomberg), but below our forecast of 0.23%. The headline figure was pressured mainly by volatile fruits & vegetable prices and gasoline prices in the non-core index which was mitigated by a seasonal subsidy to electricity tariffs. Core inflation was slightly below market expectations (0.21% vs our call and market consensus both at 0.23%), with both - core goods (0.30% vs 0.33%) and services (0.10% vs 0.14%) inflation slightly below our estimate. On an annual basis, headline inflation rebounded to 4.65% in April (from 4.42% in March) driven mainly by the non-core index, while core inflation fell to 4.37% (from 4.55%). Core goods inflation fell further to 3.67% (from 3.88%). Core services inflation also fell to 5.21% (from 5.37%) but we note it was driven mainly by the easing of tourism-related prices in 1H of April due to Easter holidays (in fact, 2H of April stood practically unchanged at 5.22%) and it continues to be at a high level (see our heat maps below).
Our take: Today’s inflation figures were mixed (should not be a game changer for today’s monetary policy decision) with core inflation surprising slightly to the downside (but with services inflation still running high), while the upside surprise in headline inflation was driven by the volatile non-core index. We expect the central bank to keep the policy rate unchanged at 11.00%, later today, in line with market consensus. We cannot rule out a dissenting vote calling for a 25-bp rate cut.
