POLL-Russia's 2025 inflation seen exceeding official forecast again

By Elena Fabrichnaya and Gleb Bryanski

MOSCOW, Jan 31 (Reuters) - Price growth in Russia is expected to exceed the central bank's forecast again in 2025 but will gradually slow during the year following a spike in January, a Reuters poll of 12 economists showed on Friday.

Inflation, which reached 9.5% in 2024, has emerged as the biggest challenge for Russian authorities as the country approaches the fourth year of what it calls "a special military operation" in Ukraine.

The inflation rate, driven by rising prices of food and housing, increased by 1.14% from the start of the year till Jan. 27.

This figure is projected to rise further to an annual rate of 10.1% in the first quarter of 2025 before slowing to a median of 6.8% for the full year, above the central bank's forecast of 4.5%-5.0%.

"The inflation picture in January essentially repeats that of December. We have not yet seen progress, but there has been no deterioration either," said T-Bank analyst Sofya Donets.

Economists unanimously forecast that the key interest rate would remain at the current level of 21% despite the inflationary spike in January and inflationary expectations being at their highest level since 2023.

"Despite the accelerated growth in prices in January, we are already observing waning momentum. This may serve as a reason for the central bank to maintain cautious rhetoric without resorting to raising the rate," said Evgeny Koshelev of Rosbank.

The central bank surprised analysts in December by leaving the key rate unchanged. The benchmark interest rate is currently at its highest level since the early 2000s, prompting criticism of the regulator's policy.

"The case for a pause is supported by the moderate reaction of business and population expectations to the shocks at the end of 2024, while the tight monetary policy continues to contribute to the slowdown in retail and corporate lending," said Koshelev.

Russia's economic growth is expected to slow to 1.7% in 2025 from a current rate of about 4% that has been fueled by military spending and high rates of corporate and retail lending, boosted by state subsidies.

The rouble, which has firmed by 11% to 98 against the U.S. dollar so far this year on expectations of easing tensions between Russia and the United States, is expected to stay close to current levels in the coming months.

"We believe that the rouble will remain stable in February and will trade close to its current values," said Kirill Sokolov of Sovkombank. The rouble is projected to weaken to a median of 108 to the dollar in a year.