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Economists Expect Russian Central Bank to Slash Rates Again by April

30 of 33 economists predicted the rates would be lowered again.

Governor Elvira Nabiullina / Reuters

The Central Bank of Russia is expected to make another cut in interest rates by the end of April following a surprise cut on January 30, Bloomberg said, reporting the findings of its survey of a group of economists.

According to the survey, 30 of 33 economists predicted the rates would be lowered again, and 70 percent said the cut would be made by April 31. Last week, a majority predicted that borrowing costs would be held until at least June. Four economists now say the key rate may be lowered at an unscheduled meeting as early as this month, the report said.

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Central bankers in Moscow led by Governor Elvira Nabiullina last week started to reverse a December emergency increase, signaling they are focused on tempering an economic slump that threatens to destabilize the financial industry. The U-turn followed warnings from politicians and business leaders that the high borrowing costs were choking banks and companies, Reuters said.

The ruble, which lost 46 percent to the dollar last year, is the best performer among more than 170 currencies tracked by Bloomberg since the surprise rate cut, having gained more than 5 percent as the price of oil climbed. The ruble weakened 1.2 percent to 65.9410 against the dollar as of 2:58 p.m. in Moscow, the report said.

“There will be a decline in rates, ” Dmitry Polevoy, chief economist for Russia and the Commonwealth of Independent States at ING Groep in Moscow, said by email, according to Bloomberg. “The economy and banks can’t function with the key rate at 15 percent.”

Last week’s reduction took the benchmark rate to 15 percent from 17 percent, clawing back less than a third of the 6.5 percentage-point December increase, the biggest since 1998. Inflation accelerated to 13.1 percent as of Jan. 26, according to the central bank, the report said.

Russian monetary policy “remains tight, ” Nabiullina told reporters in Moscow on Tuesday. Policymakers won’t fight inflation at “excessive” cost to the economy, she said. The next rate meeting is scheduled for March 13, Bloomberg said.

“The rate remains high for the economy, we understand that perfectly, ” Nabiullina said. Inflation expectations easing in January and a degree of stability in the currency market allowed the central to reduce the rate, she said, according to the report.

Meanwhile, Standard & Poor’s published an update of long-term default values of the largest Russian companies, the Vestnik Kavkaza news agency said. The ratings for Gazpromneft, Gazprom, Russian Railways, Megafon and MTS were slashed from BB+ to BBB- with a negative forecast. Ratings were also lowered for Rosneft, Transneft and Novatek. LUKOIL’s rating remains at BBB- with a negative forecast.



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