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Russia seen cutting rates sooner as inflation, economy slow - Reuters Poll

Russia seen cutting rates sooner as inflation, economy slow - Reuters Poll
FILE PHOTO: A Russian flag flies over Russian Central Bank headquarters in Moscow, Russia December 3, 2018. REUTERS/Maxim Shemetov -
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MAXIM SHEMETOV(Reuters)
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By Andrey Ostroukh

MOSCOW (Reuters) – Russia’s central bank is seen cutting rates sooner than previously expected as inflation is slowing towards the target, a monthly Reuters poll showed on Friday.

The central bank is seen keeping its key rate at 7.50% at the July board meeting before trimming it to 7.25% at the next meeting in September, the average forecast among analysts and economists from 16 banks and companies polled in late June showed.

The previous poll conducted in late May predicted a rate cut to 7.25% only in the fourth quarter of this year.

Expectations for the imminent cut have grown after the central bank said in mid-June that one or two more cuts were possible later this year as Russia faces sluggish economic growth and slowing inflation.

Full-year inflation in 2019 is now seen at 4.3%, below the 4.6% level predicted a month ago. Inflation is set to reach the central bank’s target of 4% next year, the poll showed.

The poll also revealed a slightly negative change in the economic outlook. Gross domestic product is seen growing by 1.2% this year, with forecasts ranging from 0.7% to 1.7%.

The April poll predicted a 1.3% GDP growth in 2019 after a 2.3% expansion in 2018.

In 12 months, the rouble is seen at 66.50 versus the dollar and at 76.31 versus the euro. The previous poll foresaw exchange rates of 66.00 and 74.94, respectively.

“The rouble continues to enjoy stability, as the U.S. Congress has not been active in pushing through anti-Russia sanctions,” said Vladimir Miklashevsky, senior economist and trading desk strategist at Danske Bank.

The rouble has been broadly stable amid large oil price fluctuations but the still existing probability of more U.S. sanctions against Moscow “skew the FX risks towards weakening a bit,” Miklashevsky said.

On Friday, the rouble’s official exchange rates, set by the central bank, were 63.05 per dollar and 71.66 per euro, with the Russian currency steady ahead of a meeting at the weekend between the U.S. and Chinese presidents as their countries are embroiled in a trade war.

(Reporting by Andrey Ostroukh)

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