(This content was produced in Russia, where the law restricts coverage of Russian military operations in Ukraine.)
MOSCOW (Reuters) – The Russian central bank is expected to cut its key interest rate by 50 basis points to 9% on Friday as it tries to make lending more affordable as inflation slows, the majority of analysts polled by Reuters suggested on Monday.
The bank has been gradually reversing an emergency rate hike to 20% in late February that was triggered by Russia’s Feb. 24 move to send tens of thousands of troops into Ukraine and the imposition of Western sanctions in response.
Since then, the central bank made three 300-bps cuts in a row, before trimming by 150 bps to 9.5% at its last meeting on June 10. At that meeting, it kept the door open to further easing.
Fifteen of 26 analysts and economists polled by Reuters in mid-July predicted that Russia would cut the key rate by 50 bps on Friday.
Renaissance Capital analysts forecast a 50-bps cut, saying the Bank of Russia may want to leave itself some wriggle room at subsequent meetings.
“Inflationary pressures eased in May-July, but risks of a second wave of quickening inflation remain,” Renaissance Capital said.
Russia’s annual inflation slowed to 15.62% in the week to July 8 from 16.19% the week before, the data showed. That is still far above the central bank’s 4% target, but down from 20-year highs seen soon after Moscow sent troops into Ukraine.
“In our view, the central bank’s choice lies in cutting from 50 to 75 basis points,” said Andrei Duryagin, investments director at MKB Investments. “We are leaning towards a more conservative view and a cut of 50 basis points.”
Duryagin said that inflation data may strengthen the central bank’s confidence in its ability to make a larger cut, but said that regardless of Friday’s decision, the key rate is likely to end the year below 8%.
Five of the analysts forecast a 100-bps cut, with one predicting a sharper cut to 8% and three others expecting the bank to trim to 8.75%.
“Further monetary easing is supported by slowing inflation, a fall in lending and the need to support a shrinking economy,” said Sovcombank chief analyst Mikhail Vasilyev, forecasting a 100-bps cut as a base case scenario.
One of the polled economists forecast rates would remain at 9.5%, with one other predicting a small cut to 9.25%.
(Reporting by Reuters; Editing by Nick Macfie)
