Russia’s Interest Rate Forecast

(Reuters) – Russia’s central bank is expected to raise its benchmark interest rate by 100 basis points to 19% at its Sept. 13 meeting to combat inflation and cool the overheated economy, according to a Reuters poll of analysts.

The consensus forecast from 15 analysts polled suggested that annual inflation will end 2024 at 7%, a decrease from the current rate of 9.1% but slightly up from a prior forecast of 6.9%.

The central bank anticipates inflation in the range of 6.5-7.0% in 2024 as supply catches up with demand.

At its last meeting in July, the central bank raised the benchmark interest rate by 200 basis points to 18%, the highest level since April 2022. The central bank indicated that a tight monetary policy would remain in place to achieve a sustainable slowdown in inflation.

Analysts predict that Russia’s double-digit benchmark interest rate will stay until 2027 when it is expected to reduce to 9.0%. The central bank forecasts an average benchmark rate between 7.5% and 9.5% in 2027.

GDP growth for this year is projected at 3.6%, below the updated official forecast of 3.9% from Finance Minister Anton Siluanov.

Growth in capital investment is expected to be 7% in 2024, down from 9.8% last year.

The rouble is forecasted to weaken by over 5%, reaching 96.0 against the U.S. dollar in a year, compared to the current rate of 91.19. Negative factors impacting the rouble include geopolitical risks, sanctions, capital outflows, and increased budgetary expenditures, according to Mikhail Vasilyev, chief analyst at Sovcombank.

(Reporting and polling by Gleb Bryanski and Alexander Marrow; Editing by Christina Fincher)