Russia needs to raise interest rates further as the highest inflation since 2016: analyst polls


Moscow-Russia needs to raise interest rates further to fight stubborn high inflation, which is better than expected and shows few signs of slowdown, a Reuters poll said Thursday.

Russia’s export-centric economy has already recovered to pre-pandemic levels and is on a path to further growth. But the recovery, along with global inflation and weak rubles, is pushing up consumer prices and lowering living standards.

A consensus forecast of 22 analysts polled in late September suggested that the central bank would raise its sixth key rate this year to 7% at its board meeting on 22 October.

Some analysts said the central bank raised interest rates to 7.25%, addressing inflation, which accelerated to 7.3% in late September, and surpassing the 4% target at the last level seen more than five years ago. Stated.

“Russia now seems to be addressing the consequences of additional social payments made by the government prior to the parliamentary elections on September 17-19,” ING said.

President Vladimir Putin raised expectations for inflation by ordering pensioners and the military to make one-time payments prior to the election.

Inflation consensus forecasts at the end of 2021 have moved from the 6.0% seen in late August to 6.5%.

Higher interest rates are designed to curb inflation, a delicate issue in Russia, and need to support the ruble by making investment in high-yielding ruble assets more attractive.

Analysts predicted that the rubles would trade at $ 72.70 and € 86.00 12 months from now, compared to the previous polls of 74.00 and 89.00, respectively.

“The ruble remains bullish as fundamentals improve,” said an Oxford Economics research firm.

“But given evidence of intensifying net private capital outflows, we believe that the USD / RUB, which is currently around 73, will only increase by about 3% over the remaining USD in 2021. . “

Opinion polls show that the economy is on track for 4.3% growth this year, despite rising interest rates, and is the fastest in 10 years, confirming the forecast a month ago. ..

Most of Reuters poll forecasts were based on at least 10 individual forecasts.

By Andrey Ostroukh

Reuters

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