May 31, 2018 / 3:51 PM / a year ago

Russian central bank seen keeping rates on hold for longer while inflation high: Reuters poll

MOSCOW (Reuters) - The chances of the Russian central bank trimming its interest rate in June have fallen in the past month as expectations of higher consumer price inflation during the World Cup have grown, a monthly Reuters poll of 20 analysts and economists showed.

Having gradually cut rates since 2014, the central bank put them on hold in April as new U.S. sanctions battered the ruble, driving concerns that the weaker currency would soon filter into consumer prices.

Now the central bank is seen holding the key rate at 7.25 percent RUCBIR=ECI for the second time in a row, according to 15 out of 20 analysts and economists polled by Reuters.

Central bank officials have made plenty of comments recently that suggest there will be no rate cut in June, said Irina Lebedeva, a debt analyst at Uralsib Capital.

Investors are now waiting to see a report on monthly inflation due from the statistics service on June 5-6, some 10 days before the rate decision, which should shed some light on the impact of the ruble’s drop on inflation.

By the end of the year, the central bank is still expected to cut its key rate to 6.75 percent, bringing the cost of borrowing into the 6-7 percent range that it had previously said reflected a neutral monetary policy stance rather than a tightening one, given inflation is below the bank’s ultimate 4 percent target.

Annual inflation, the poll showed, is now seen at 3.7 percent at the end of 2018, taking into account a recent weakening in the ruble, versus 3.4 percent predicted by the previous poll.

“Higher than expected data on consumption in April and a potential for higher internal demand during the soccer World Cup in June-July also up inflationary risks,” said Natalia Orlova, chief economist at Alfa Bank.

Economists predict the World Cup will have a short-lived impact on the economy of its host, downplaying Moscow’s hopes that the billions of dollars spent on preparations for the tournament could lead to an economic boost.

Despite hosting the prestigious soccer tournament, Russia is on track to post 1.6 percent economic growth this year, the poll showed, down from the 1.7 percent predicted in late April.

The ruble forecasts, however, remained broadly unchanged. The rouble is now seen at 60.80 against the dollar in a year from now, compared with 60.30 predicted in the previous poll.

In afternoon trade on Thursday, the ruble hovered at 62.26 versus the U.S. currency, down 7.4 percent so far this year RUBUTSTN=MCX.

Writing by Andrey Ostroukh; Editing by Hugh Lawson

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