Russia needs higher interest rates to keep inflation under control: Reuters poll | Invest News
MOSCOW (Reuters) – Russia will need to raise interest rates this year to their highest level since 2017 and hold them there for several months as inflation shows few signs of slowing amid a strong economic recovery , a Reuters poll revealed on Friday.
Rising inflation in Russia is due to higher prices globally and a weak ruble in the country, which lowers the standard of living and prompts the central bank to increase the cost of loans.
The average of the 19 analysts polled in late October suggested the central bank would raise its policy rate for the seventh time this year at the December 17 board meeting to 8%.
Year-end forecasts ranged from 7.5% to 8.5% and exceeded the 6.5% the same poll predicted in late September before the central bank raised the key rate to 7.5% last week and does not rule out further increases.
Sovcombank analysts said Russia will raise the rate to 8.5% in December while inflation will remain close to 8% next month, which “will require decisive action.”
Annual inflation, which the central bank is targeting at 4%, is expected to end this year at 7.8%, according to an average forecast, against 6.5% in the previous poll.
Higher rates are designed to bring inflation under control, a sensitive issue in Russia, but could slow economic recovery.
This year, the Russian economy is expected to grow by 4.4%, after suffering its largest contraction in 11 years of 3% in 2020.
Higher rates can also support the ruble by making it more attractive to invest in high-yielding ruble assets.
âThe efforts of central banks and the strengthening of the ruble thanks to the prices of non-oil exports could lead to a marked slowdown in inflation in the first half of 2022, when high rates could start to dampen economic growth,â said Anton Tabakh, Chief Economist at Expert RA. rating agency.
Longer term, the poll’s forecast average suggested that the ruble would trade at 72.75 per dollar and 83.50 per euro in 12 months, compared to forecasts of 72.70 and 86.00 respectively in the previous poll.
Russia’s official exchange rates on Friday stood at 70.52 per dollar and 81.84 per euro.
Most of the Reuters poll predictions were based on at least 10 individual projections.
(Report by Andrey Ostroukh, edited by Andrew Cawthorne)
Copyright 2021 Thomson Reuters.