Russia’s Sberbank sees more rate cuts, higher growth this year despite Ukrainian attacks

MOSCOW, August 28 - Russia's central bank plans to keep reducing its key rate, bringing it down to 13.5% from 14% by year-end, according to Sberbank's chief economist, Alexander Isakov. This comes despite ongoing Ukrainian attacks on economic targets. The bank has raised its 2026 economic growth forecast to 0.4% from 0.3%, driven by a stronger-than-expected second quarter and robust consumer and state demand.

Key drivers of growth remain the budget and consumer sectors, though this may change, Isakov noted. Fiscal spending is expected to add 2% of GDP to the economy this year. The central bank raised its key rate in 2024 to combat inflation but has faced criticism for contributing to a slowdown. Recent Ukrainian attacks on oil refineries, internet trade, and grain exports via the Black Sea have caused petrol shortages, business losses, and halted exports.

Despite these challenges, the bank still cut rates by 25 basis points in July. Isakov suggests a possible rate cut in September, followed by a pause before the year's end, with subsequent cuts of 25 to 50 basis points per meeting. The next rate-setting meeting is scheduled for September 11, with more in October and December. However, significant uncertainty surrounds the outcomes.

The rouble, weakened by 15% to approximately 80 dollars since May, is expected to drop further to between 86 and 88 dollars by year-end. Inflation, fueled by petrol prices and attacks, remains a concern, but the bank has not lowered its full-year inflation forecast, which is still predicted at 6.5%.