Russia central bank seen cutting key rate to 6.5 percent by year-end: Reuters poll

MOSCOW (Reuters) - The Russian central bank is expected to cut its key interest rate to as low as 6.5 percent by the end of the year, the level where it is seen holding the cost of borrowing throughout 2019, a monthly Reuters poll showed on Friday.

A view shows the Russia's Central Bank headquarters in Moscow, Russia February 22, 2018. REUTERS/Sergei Karpukhin

The Bank of Russia said earlier this month the rate-cutting cycle was nearing an end, as inflation, once stubbornly high at double-digit levels, is now below its four percent target.

A consensus poll of 16 analysts and economists showed the market expects the central bank to trim its key rate to 7.00 percent in April from the current level of 7.25 percent.

The bank is next seen lowering the key rate to 6.75 percent in the second quarter and then cutting it further to 6.50 percent in the fourth quarter of 2018.

Inflation is expected to be 3.5 percent at the end of 2018.

Lower interest rates boost lending, which can help Russia to prop-up its stalling economic recovery.

Gross domestic product is expected to grow by 1.8 percent in 2018, before picking up to 1.9 percent in 2019, the poll showed.

This is above 1.5 percent GDP growth seen in 2017 but far below the average annual growth of 7 percent that Russia used to enjoy thanks to rising oil prices prior to the financial crisis of 2008-2009.

Economic growth this year will be propped up by consumer demand and capital investment.

Retail sales, the gauge for consumer demand, are expected to increase 2.6 percent in 2018, while capital investment is seen growing by 3.2 percent.

Official unemployment levels are seen steady around 5 percent in 2018 and in 2019, the poll showed.

The rouble is seen trading at 57.41 against the dollar in 12 month's time versus 58.40 predicted by last month's poll RUBUTSTN=MCXRUB=.

The Russian currency traded at 57.41 per dollar on Friday.

Writing by Andrey Ostroukh; Editing by Elaine Hardcastle