By Gleb Bryanski and Elena Fabrichnaya MOSCOW (Reuters) - Russia's central bank will keep its key interest rate on hold at 21% at its board meeting on June 6, but may soften its rhetoric and signal
Russian Central Bank Expected to Maintain Key Interest Rate at 21%
By Gleb Bryanski and Elena Fabrichnaya
MOSCOW (Reuters) - Russia's central bank will keep its key interest rate on hold at 21% at its board meeting on June 6, but may soften its rhetoric and signal rate cuts later in the year, a Reuters poll of 26 economists showed on Monday.
Seven economists expected a rate cut this week, but the majority pointed to still rising household inflationary expectations, which are closely monitored by the central bank, as well as geopolitics, as obstacles to an early cut.
"The geopolitical factor and the state of the global economy remain the main sources of uncertainty. The decline in oil and commodities poses risks of a weaker rouble and higher inflation," said Sovkombank's chief economist Mikhail Vasilyev.
Russia and Ukraine held their second round of peace talks on Monday, but the two sides are still far apart on how to end the war and the fighting stepped up ahead of the negotiations.
Natalya Orlova from Alfa Bank cited the rise in inflationary expectations, low unemployment, and increased risks to the budget as the main factors in favour of keeping rates unchanged.
"I believe that the transition to a rate cutting cycle is better postponed until the fall, when the picture of food price dynamics in the new season becomes clearer," Orlova said.
In the poll, the forecast for inflation this year was unchanged from the previous poll at 7%, while gross domestic product (GDP) growth was seen slightly lower at 1.5% compared to 1.6% in the previous poll.
The rouble, which has rallied by over 42% against the dollar this year mostly on expectations of a peaceful settlement in Ukraine, is seen weakening to 97.5 to the U.S. dollar in one year compared to 95 to the dollar in the previous poll.
The rouble's rally, which has taken place despite a fall in prices for oil, surprised many analysts, but has also helped the central bank in fighting inflation as imported goods are becoming cheaper.
(Reporting by Gleb Bryanski and Elena Fabrichnaya. Editing by Guy Faulconbridge and Mark Potter)
