Russia will not change rates in February despite downturn in economy
2023.01.31 10:18
Russia will not change rates in February despite downturn in economy
By Ray Johnson
Budrigannews.com – On Tuesday, the Bank of Russia will maintain interest rates at 7.5 percent the following week because inflation remains above target, causing the country’s economy to experience a second year of contraction in 2023.
On February 24, Russia sent tens of thousands of troops into Ukraine. This sparked broad Western restrictions on Russia’s energy and financial sectors and caused a slew of businesses to leave the market.
Analysts anticipate a longer-term deterioration of Russia’s economic health, predicting a drop in GDP of 2% this year, following an estimated 2.5% decline in 2022. Initial expectations of a double-digit economic slump proved to be exaggerated.
In an effort to bring inflation back to its target of 4%, the Bank of Russia is expected to keep the key rate at 7.5 percent at its February 10 board meeting, according to the average of 17 analysts and economists surveyed at the end of January.
In January, inflation expectations fell to 11.6%, but they are still high, which is a crucial indicator that the central bank closely monitors prior to meetings. According to the central bank, inflation risks are expected to rise this year.
The International Monetary Fund, on the other hand, forecasted 0.3% growth in Russia’s economy on Tuesday, in contrast to analysts’ expectations of a 2% decline in GDP this year.
The poll’s average predictions indicated that the rouble would trade at 73.00 against the dollar in a year, compared to analysts’ earlier prediction of 72.50. The official rate on Tuesday was 69.59 roubles for every dollar.
According to analysts at Rosbank Research, “a negative mood dominates in the FX segment at the moment, which raises the likelihood of short-term moves toward a weaker rouble.”
“Fears related to the consequences of the price ceiling on oil products are having their say,” Rosbank added. “Consistent pressure on the geopolitical front”
The poll found that the central bank would gradually lower the key rate to 7.13 percent by the end of the year, with forecasts ranging from 6.50% to 8.00%, up from 7% in the previous poll.
According to the previous poll, annual inflation is expected to end the year at 5.8%, which is a significant decrease from the double-digit increase that occurred last year.
