August 30, 2019 / 1:14 PM / 16 days ago

Russia likely to cut rates amid weak GDP growth, slowing inflation: Reuters poll

MOSCOW (Reuters) - Russia is expected to cut interest rates further amid slowing economic growth and inflation and a relatively steady rouble, provided there are no new external shocks, a monthly Reuters poll showed on Friday.

Forecasts of 24 analysts and economists polled in late August have not changed from a month earlier; they projected the Russian economy would expand by 1.0% in 2019.

That is in line with July’s forecast and below predictions from a few months ago. The latest outlook on gross domestic product growth is also below the economy ministry’s forecast for a 1.3% increase and the 2.3% expansion in 2018.

“We see Russia’s GDP growth marginally lower than previously, as global demand for commodities is likely to moderate, while crude supply is set to stay abundant due to the U.S. increasing production,” said Vladimir Miklashevsky, senior economist and trading desk strategist at Danske Bank.

Amid sluggish GDP growth, the central bank is seen cutting its key rate, now 7.25%, to 7.00% in the third quarter and then to 6.75% in the first three months of 2020. The next rate-setting meeting is scheduled for Sept. 6.

Annual inflation, the central bank’s key remit, is seen at 4.3% in 2019, the August poll showed, at the same level as in the previous monthly poll. Most of the forecasts in the Reuters poll are based on at least 10 individual projections.

For the next 12 months, the rouble is expected to trade at 66.00 to the dollar and 76.00 to the euro. The previous poll foresaw exchange rates of 66.50 and 76.85, respectively.

“We expect the rouble rate against the U.S. dollar to stay near current levels in coming months,” said Alexei Kuznetsov, head of economic research at Eurasian Development Bank in Moscow.

“The main risks for the rate dynamics are concentrated in the external economic sector and are primarily linked to the development of the trade conflict between the U.S. and China, and the sanctions policy against Russia,” Kuznetsov said.

On Friday, the rouble’s official exchange rates, set by the central bank, were 66.75 per dollar and 73.96 per euro, with the Russian currency recovering from six-month lows on hopes about the possible resumption of trade talks between Washington and Beijing.

Reporting by Andrey Ostroukh, editing by Larry King

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