The Bank of Russia will keep interest rates on hold at 7.5 percent next week as inflation remains above target, pushing the country’s economy to a second year of contraction in 2023, a Reuters poll showed on Tuesday.
Russia’s economic landscape changed drastically after Moscow sent tens of thousands of troops into Ukraine on Feb. 24, triggering sweeping Western restrictions on its energy and financial sectors, and leading scores of companies to exit the market.
Initial expectations of a double-digit economic slump in 2022 proved overblown, but analysts anticipate a longer deterioration of Russia’s economic health, predicting a drop in gross domestic product (GDP) of 2 percent this year, following on from an estimated 2.5 percent slide in 2022.
The average of 17 analysts and economists polled in late January suggested the Bank of Russia will hold the key rate at 7.5 percent at the Feb. 10 board meeting, as it bids to bring inflation back to its 4 percent target.
Inflation expectations, a key indicator the central bank pays close attention to in the run up to meetings, fell to 11.6 percent in January, but remain elevated. The central bank said it sees inflation risks rising this year.
Analysts’ expectations of a 2 percent drop in GDP this year contrast with that of the International Monetary Fund, which on Tuesday said it saw Russia’s economy growing 0.3 percent.
