The Russian central bank is expected to hold its key interest rate at 7.5% on Friday, ending a months'-long rate-cutting cycle, as an inflation slowdown becomes less marked and geopolitical uncertainty saps consumer demand, a Reuters poll found on Monday.
The bank has gradually reversed an emergency rate hike to 20% in late February that followed Russia's decision to send tens of thousands of troops into Ukraine and the imposition of increasingly wide-ranging Western sanctions in response. Economic activity slowed significantly at the end of September, the central bank said this month. Tens of thousands of people have joined the army or fled the country since the Sept. 21 mobilisation order.
While that may have a disinflationary impact, combined with general uncertainty depressing consumer demand, inflationary expectations among Russian households - an indicator to which the Bank of Russia pays close attention - remain elevated.
Annual inflation slowed to 13.68% in September, but the decline was slight, Georgy Vashchenko, deputy director of Freedom Finance Global's research department, said.
"At the same time there is a risk of a strong decrease in consumer activity in the fourth quarter," Vashchenko said. "Stimulating growth of retailer and corporate lending by lowering the rate is currently pointless, in my view."
The Bank of Russia may change its rhetoric on Friday and give a more hawkish signal to the market, hinting at a possible key rate increase at the following meeting, Andrei Duryagin, investments director at MKB Investments, said.
Three analysts forecast a cut to 7.25%, with one predicting a 50-basis-point reduction.
