March 18, 2019 / 11:10 AM / 9 months ago

POLL-Russian central bank seen holding key rate at 7.75 pct on Friday

* reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/cb-polls?RIC=RUCBIR%3DECI poll data

* Russian holds rate-setting meeting on March 22

* All 26 analysts polled expect rate kept at 7.75 pct

By Andrey Ostroukh and Elena Fabrichnaya

MOSCOW, March 18 (Reuters) - The Russian central bank is seen keeping its key interest rate unchanged on Friday as inflation this year has so far been weaker than initially expected, requiring no additional rate hikes, a Reuters poll showed on Monday.

Twenty-six analysts and economists polled this month unanimously expect the central bank to keep the key rate at 7.75 percent at its board meeting on March 22.

The bank twice raised the rate in the second half of 2018 in a bid to keep a lid on inflation, which it said could reach 6.0 percent this year because of a weaker rouble, rising fuel prices and an increase in the value-added tax (VAT).

But inflation in the first three months of 2019 has been lower than it initially forecast. In February inflation stood at 5.2 percent and is expected to accelerate to 5.5 in March and April before slowing down.

“We believe that the CBR (Bank of Russia) will send a message of guarded upbeat sentiment, which will essentially state that inflation turned out lower than expected in 1Q19 but that it is too early to adjust the annual number for the full scale of this surprise,” VTB Capital analysts said in a note.

The central bank will announce its rate decision at 1030 GMT on Friday, and Central Bank Governor Elvira Nabiullina will shed more light on the bank’s decision and outlook at a press conference scheduled for 1200 GMT.

First Deputy Governor Ksenia Yudayeva said this month that inflation had been lower than forecast because of a recovery in the rouble’s exchange rate.

The Russian currency hit a seven-month high against the dollar on Monday, helped by higher oil prices and foreign investors’ interest in Russian treasury bonds.

“Inflation and inflation expectations are showing a very positive dynamic, and the effect from (the increase in) the VAT, which was minor at the end of Q1, has already been priced in,” said Stanislav Murashov, an analyst at Raiffeisen Bank in Moscow.

The central bank’s monetary policy chief, Alexei Zabotkin, told Reuters this month that it might not need to further raise interest rates if the two pre-emptive rate hikes carried out last year were enough to keep inflation under control.

The central bank has hinted that it could start cutting the key rate later this year as the effects of a weak currency and the increase of the VAT have proven not as strong as expected. But analysts say it is unclear when it could do so.

“Our main question ahead of this week’s meeting is how fast the CBR is ready to remove the last 25bps hike in the policy rate,” said Alexey Pogorelov, chief Russia economist at Credit Suisse in London.

Reporting by Andrey Ostroukh and Elena Fabrichnaya Writing by Gabrielle Tétrault-Farber Editing by Peter Graff

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