According to a Reuters poll of analysts, Russia's central bank is projected to increase its benchmark interest rate by 100 basis points to 19% at its upcoming meeting on Sept. 13. This move is aimed at tackling inflation and cooling down the overheated economy.
The consensus forecast from 15 analysts indicates that annual inflation is expected to reach 7% by the end of 2024, a slight increase from the previous forecast of 6.9%. The central bank is aiming for inflation to be in the range of 6.5-7.0% in 2024 as the supply of goods and services catches up with demand.
At its previous meeting in July, the central bank raised its benchmark interest rate by 200 basis points to 18%, the highest level since April 2022. The bank has signaled that tight monetary policy will continue for some time in order to achieve a sustainable slowdown in inflation.
Analysts predict that Russia's double-digit benchmark interest rate will persist until 2027, when it is expected to drop to 9.0%. The central bank forecasts an average benchmark rate of 7.5%-9.5% in 2027.
Analysts also forecast GDP growth of 3.6% for this year, slightly below the Finance Minister's updated official forecast of 3.9%. Capital investment growth is expected to be at 7% in 2024, down from 9.8% last year.
The rouble is anticipated to weaken by over 5% to 96.0 against the U.S. dollar within a year, compared to the current exchange rate of 91.19. Factors contributing to this include geopolitical risks, capital outflows, demand for foreign currency, and increased budgetary expenditures.
Overall, the central bank's decision to raise interest rates reflects its commitment to managing inflation and stabilizing the economy. This move can have implications for investors, borrowers, and consumers in Russia, impacting their financial decisions and the overall economic landscape.
