11.2 C
New York
Wednesday, February 28, 2024

Russia to raise rates past 9% this year under persistent inflation pressure: Reuters poll

Russia to raise rates past 9% this year under persistent inflation pressure: Reuters poll
© Reuters. FILE PHOTO: A Russian state flag flies over the Central Bank headquarters in Moscow, Russia May 7, 2023. A sign reads: “Bank of Russia”. REUTERS/Shamil Zhumatov/File Photo

By Alexander Marrow and Elena Fabrichnaya

(Reuters) – Gradually quickening inflation will force the Bank of Russia to hike interest rates again this year, a Reuters poll showed on Monday, and the rouble will struggle to claw back losses sparked by June’s abortive armed mutiny in the next 12 months.

The central bank increased its key rate by a larger-than-expected 100 basis points on July 21, with the weak rouble adding to inflation pressure from a tight labour market and strong consumer demand.

The average forecast of 18 analysts and economists polled in late July shows the key rate ending 2023 at 9.50%, with annual inflation expected to climb from just above the 4% target currently to 5.6% by year end.

“Accelerating inflation in recent weeks raises risks that the Bank of Russia will again lift the key rate by 100 basis points at its next meeting on Sept. 15 to 9.5%,” said Mikhail Vasilyev, chief analyst at Sovcombank.

The high base effect of last year’s double-digit price rises saw annual inflation drop below the central bank’s target in recent months. Economy ministry data showed it moved back above 4% last week for the first time since late March, in a symbolic blow for Moscow.

The rouble’s sharp drop has added to already stubborn inflationary pressure.

The Russian currency weakened sharply after mercenary leader Yevgeny Prigozhin’s Wagner group briefly marched towards Moscow in late June, slumping to a more than 15-month low in early July.

Analysts give the rouble only a slim chance of strengthening, with the average forecast suggesting the rouble will trade at 89.00 against the dollar a year from now, up from a prediction of 87.90 a month ago.

In spite of higher rate expectations, analysts again improved their forecasts for Russian gross domestic product (GDP), now envisaging 2023 growth of 2.0%, up from 1.2% in the late June poll.

(Reporting and polling by Alexander Marrow and Elena Fabrichnaya; Editing by Sharon Singleton)

Source: Investing.com

Related Articles


Please enter your comment!
Please enter your name here

Stay Connected

- Advertisement -

Latest Articles

Popular Articles