MOSCOW: Russia’s central bank will cut its main lending rate again on April 30 as the economy contracts more and inflation, although high, remains stable, a Reuters poll predicted on Monday.

Output has tumbled while inflation remains a concern as low international oil prices and Western sanctions imposed over the Ukraine conflict have harmed export earnings and investment inflows.

But Russia has lately seen signs of financial stabilisation, notably a recovery in the rouble, as the oil price has steadied above $50 per barrel and a peace deal in eastern Ukraine is broadly holding up.

“The situation in the economy is tense, but not critical,” said Anton Struchenevsky, economist at Sberbank CIB.

Out of 15 analysts who gave a forecast for the bank’s key rate, 10 predicted a one-point cut to 13 per cent, with three predicting a half-point cut, one a two-point cut, and one predicting no change in rates.

The bank next discusses interest rates on April 30.

At its meeting on March 13, it cut the key lending rate by one point, following a two-point cut in January, signalling that it now regards weak economic growth as a more serious concern than high inflation.

Analysts expect the bank to continue gradually cutting rates as recent data shows that inflation has stabilised, while economic activity remains weak.

The poll forecast March’s inflation at 16.8pc, only slightly above a 13-year high of 16.7 reached in February, with gross domestic product predicted to decline by 2pc.

“In March the recession will continue. However the pace of the economic decline remains still at a modest level of 2-3pc a year,” said Otkritie economist Darya Isakova.

Published in Dawn, March 31st, 2015

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