Russia May Start Rate Cuts in March, VTB Capital Says

(Corrects to show time period of forecast in third paragraph of story published yesterday.)

Russia’s central bank may begin lowering interest rates next spring, a move that will accelerate economic growth in the second half of 2013, VTB Capital said.

An easing cycle of rate cuts and medium-term refinancing for the banking industry may begin in March or April, according to VTB Capital’s chief economist for Russia, Maxim Oreshkin, who correctly predicted a quarter-point reduction in the cost of swapping foreign currency into rubles and an increase of that amount in the deposit rate at the central bank’s last meeting Dec. 10.

Monetary policy will be one of the factors driving faster economic growth in the second half of 2013,” Oreshkin told reporters today in Moscow. “The main risk is that the authorities become dissatisfied with the slow pace of growth,” which may prompt them to “ask for excessive monetary easing that will push inflation out of control” in 2014.

Russia needs economic growth of 5 percent to 6 percent or more every year for the next decade, President Vladimir Putin said yesterday in his first state-of-the-nation address since returning to the Kremlin in May. With oil prices averaging $95 a barrel, gross domestic product will rise by 2 percent to 2.2 percent in 2013, helping the central bank keep inflation within its 5 percent to 6 percent target, according to VTB Capital.

Three-month borrowing costs may fall 33 basis points, or 0.33 percentage point, in the next three months, according to forward-rate agreements tracked by Bloomberg. The cost to fix floating interest payments in rubles for a year using rate swaps is 7.34 percent, data compiled by Bloomberg show.

To contact the reporter on this story: Olga Tanas in Moscow at

To contact the editor responsible for this story: Balazs Penz at

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