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Russian rouble to weaken over next year as rates gradually come down

<html xmlns="http://www.w3.org/1999/xhtml"><head><title>POLL-Russian rouble to weaken over next year as rates gradually come down</title></head><body>

reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=RUGDPYAP poll data

Bank of Russia seen holding key rate at 16% in April

Rouble seen at 96.0 vs dollar in 12 months

Russia's GDP growth seen at 1.7% in 2024

Inflation expected at 5.3% at end-2024

This content was produced in Russia where the law restricts coverage of Russian military operations in Ukraine

By Elena Fabrichnaya and Alexander Marrow

MOSCOW, March 29 (Reuters) -Russia's rouble is expected to weaken to 96 to the U.S. dollar over the next 12 months, a Reuters poll showed on Friday, as the Bank of Russia gradually lowers interest rates, oil prices ease and support from state forex interventions likely decreases.

The rouble is currently buoyed by high oil prices, capital controls, Russia's current account surplus, and high rates.

Russia's central bank, grappling with stubbornly high inflation, is seen holding its key rate at 16% on April 26, as it did in February and March after five rate hikes in a row before that, the poll of 16 analysts and economists showed.

"We believe that the Bank of Russia will keep the key rate at 16% in the first half of the year and move to lower the key rate in the third quarter (probably in July), when inflation will steadily slow down," said Mikhail Vasilyev, chief analyst at Sovcombank.

The poll showed that rates would end the year at 12.5%, with inflation at 5.3%, above the bank's 4% target. Annual inflation was 7.4% in 2023 and 11.9% in 2022.

Analysts expect the rouble, currently trading at about 92 per dollar, to weaken to 96 over the next year, a deterioration on the prediction in the previous poll.

Given that the central bank did not discuss raising the key rate in March, the likelihood of a hike in April is very low, said Alfa Bank chief economist Natalia Orlova, but risks of rapid price growth persist.

"There is still a shortage of labour, which means that wages will continue to grow," said Orlova. "In December, (wages) added 8.5% in real terms and this is much higher than experts' forecasts. Incomes grow, people spend more, inflation accelerates."

Russian President Vladimir Putin pledged trillions of roubles in spending when running for re-election this month, recycling promises about making a "decisive breakthrough" in living standards. GDP growth is dependent on military spending.

Russia's economy, where arms factories are working in three shifts round the clock, is dogged by labour shortages, population decline and low productivity and investment.

The median forecast of analysts polled in late March suggested the economy would grow 1.7% this year, a slight improvement on last month's poll.

Reporting and polling by Elena Fabrichnaya and Alexander Marrow; Editing by Gareth Jones


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