POLL-Russia faces higher inflation, weaker rouble in 2019
Annual consumer inflation, the central bank's main remit, should get a boost from the planned increase in value-added tax to 20 percent from 18 percent as well as from the pass-through impact of the weaker rouble. The rouble, vulnerable to money flows driven by geopolitical concerns, is likely to stay weak in 2019, the poll showed.
The geopolitical premium in the rouble has vanished for now because Washington did not hit Russia with harsh sanctions in autumn 2018, as some expected, and it lifted some sanctions on aluminium giant Rusal, said Vladimir Miklashevsky, an economist at Danske Bank in Helsinki. "However, the new U.S. Congress has started its sessions and a focus on anti-Russia sanctions may return as early as in the first quarter of 2019," Miklashevsky said.
"The risk of escalation in the stand-off between Russia and Ukraine also remains in place. If realised, it would send the rouble lower." The room for the rouble's strengthening is also limited by the central bank's decision to resume daily FX purchases on the local currency market to prop up state reserves.
The rouble is seen at 67.00 versus the dollar and at 80.36 against the euro a year from now, the January poll showed. That compares with 66.85 and 76.50, respectively, predicted in the December poll.
On Thursday, the rouble traded at 65.33 against the dollar and at 75.07 against the euro, supported by expectations that the U.S. Federal Reserve will not raise rates further. The Russian central bank is not expected to jack up rates, either. All analysts polled forecast that the central bank would hold its key rate unchanged at 7.75 percent at its next board meeting, on Feb. 8. The consensus forecast is that the rate will stay at that level by the end of 2019.
"Improved global risk sentiment and stabilisation on the local financial market suggest that further key rate hikes are temporarily off the table," Nordea Bank said. (Reporting by Andrey Ostroukh, editing by Larry King)
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