Russia's central bank will cut interest rates by a quarter point between now and the end of the first quarter of next year but analysts are divided on the exact timing of the move, a Reuters poll predicted on Tuesday. All 10 analysts saw no rate change at the bank's next policy meeting on October 14.
Economists' expectations of an imminent rate cut have diminished over the last month following a series of central bank statements that have made clear its determination to combat stubbornly high inflation expectations. Expectations for Russia's economic growth over the coming quarters, however, have deteriorated sharply, according to the poll. Average year-on-year economic growth over the next three quarters is now seen at 2.5 percent, down from 3.0 percent in last month's poll.
"The combination of moderately harsh monetary and budget policy will probably hold the level of economic growth below potential, unless export markets improve," said Alexander Morozov, chief Russia economist at HSBC. The poll of 10 analysts forecast the economy would grow 2 percent this year - a downward revision from last month's forecast of 2.2 percent. Growth was seen rising to 2.6 percent in 2014.
The survey showed analysts evenly split over whether the central bank would cut its key policy rate by the end of this year or leave it at 5.5 percent. It was expected to make one quarter-point cut by the end of the first quarter of 2014, followed by another quarter point cut in the second quarter. Inflation stood at 6.5 percent in August and is expected to fall to 5.8 percent by year-end, according to the poll. Last week the central bank raised its official target for inflation next year to 5 percent from 4.5 percent, to reflect the impact of a partial increase in regulated utility prices next year, which has been hotly debated by top government officials. But the Reuters poll revealed scepticism over the central bank's ability to hit even its revised inflation target.
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