Menu

Search

  |   Commentary

Menu

  |   Commentary

Search

Russian central bank likely to lower key interest rate, economy to grow 1.1 pct in 2017

Russia’s consumer price inflation came in at 0.1 percent level in the week between 11 July and 17 July. The key figure of the weekly report is 1.7 percent week/week decline in food and vegetable prices, which affirms the trend of the previous week and signals the start of the long-awaited seasonal deflation, noted Nordea Bank.

With a surprisingly cold spring and summer in the European part of Russia, new harvest is coming to market later than usual that has already pushed inflation higher in June. The headline figure rose to 4.4 percent year-on-year from 4.1 percent year-on-year in May, the rise primarily explained by unfavourable fruit and vegetable price dynamics.

There are signs of seasonal deflation gathering momentum, the short-term inflation outlook gets a shade brighter, stated Nordea Bank. The key rate is currently at 9 percent, and the two options on the table are to lower the rate by 25 basis point or to leave it unchanged.

Economic activity data released recently shows a continuing rebound of the Russian economy in the second quarter of 2017. Retail sales growth continues to be in the positive territory for the third consecutive month after more than two years of decline and is gradually gaining momentum. Retail sales growth is underpinned by a sustained real wages growth, and there is room for further acceleration actually not quite positive for inflation, stated Nordea Bank.

Industrial production grew 3.5 percent year-on-year in June and 3.8 percent year-on-year in the second quarter. Raw material extraction sector continues to mainly drive positive industrial production figures. Manufacturing and supply of electricity and gas figures are lower.

“These favorable figures might give grounds to revise upward our current forecast of 1.1 percent GDP growth in 2017”, added Nordea Bank.

  • Market Data
Close

Welcome to EconoTimes

Sign up for daily updates for the most important
stories unfolding in the global economy.