Stocks

POLL-Russia likely to cut rates further in 2020, rouble to recover

Credit: REUTERS/MAXIM SHEMETOV

The Russian central bank is expected to cut interest rates further in 2020 as inflation slows, while the rouble is likely to recover from current levels, a Reuters poll showed on Friday.

By Andrey Ostroukh

MOSCOW, Feb 28 (Reuters) - The Russian central bank is expected to cut interest rates further in 2020 as inflation slows, while the rouble is likely to recover from current levels, a Reuters poll showed on Friday.

The Bank of Russia has cut rates six times in a row, taking its key rate to 6% in February, and is likely to continue monetary easing, according to the monthly poll conducted in late February, amid a global market sell-off caused by the coronavirus outbreak.

The consensus forecasts of 24 analysts and economists suggested the key rate will drop to 5.5% by late 2020, compared with 5.88% in the previous poll in late January.

Inflation, the central bank's main responsibility, remains below the 4% target and inflationary expectations of Russian households have neared a record low, leaving room for monetary policy easing.

Low inflation may require accommodative monetary policy from the central bank, said Alexei Kuznetsov, head of economic research department at Eurasian Development Bank in Moscow.

"If disinflationary risks persist, we see a probability of the indicator (key rate) decline to 5.25-5.50% by the year-end. The scale of market volatility sparked by the coronavirus outbreak may impact changes in the key rate," Kuznetsov said.

The annual inflation rate was forecast at 2.3% in February, picking up to 3.5% by the end of 2020, below the 3.6% predicted by the previous poll.

Russia's economic growth was seen at 1.9% in 2020, above January's 1.8% forecast. Most of the forecasts in the Reuters poll were based on at least 10 individual projections.

The room for rate cuts, however, could be cramped by inflationary risks stemming from a swift drop in the rouble, driven by a sell-off on global markets and by lower oil prices. Rouble depreciation usually filters into prices, especially of imported goods and services, spurring consumer inflation.

The rouble outlook against the U.S. dollar worsened from a month ago but still implied some recovery. The rouble was expected to trade at 64.20 to the dollar and 73.11 to the euro 12 months from now. The previous poll foresaw exchange rates of 63.00 and 73.10, respectively.

On Friday, the rouble's official exchange rates, set by the central bank, were 65.61 per dollar and 71.65 per euro. The Russian currency was weak amid concerns about the aftermath of the coronavirus outbreak and another increase in tensions with Turkey over Syria.

(Reporting by Andrey Ostroukh, editing by Larry King)

((andrey.ostroukh@thomsonreuters.com; +7 495 775 1242;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Stocks Videos

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More