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By Bloomberg

It didn’t take long for economists to change their minds about the road ahead for Russian monetary policy.

After a surprise cut on Jan. 30, the Bank of Russia’s next move will be another reduction, according to 30 of 33 economists surveyed by Bloomberg, with 70 percent forecasting the move by the end of April. That compares with a majority predicting last week that borrowing costs would be held until at least June. Four economists now said the key rate may be lowered at an unscheduled meeting as early as this month.

Central bankers in Moscow led by Governor Elvira Nabiullina last week started to reverse a December emergency increase, signaling they are focused on tempering an economic slump that threatens to destabilize the financial industry. The U-turn followed warnings from politicians and business leaders that the high borrowing costs were choking banks and companies.

“The central bank will feel increasing political pressure to further cut interest rates,” Nerijus Maciulis, chief economist at Swedbank Lithuania in Vilnius, said by e-mail.

The ruble, which lost 46 percent to the dollar last year, is the best performer among more than 170 currencies tracked by Bloomberg since the surprise rate cut, having gained more than 5 percent as the price of oil climbed. The ruble weakened 0.8 percent to 65.6620 per dollar as of 11 a.m. in Moscow.

Bond Rally

Russian bonds rallied for a fourth day, pushing borrowing costs to the lowest in almost two months, as the government prepares its biggest debt auction since November. The Finance Ministry is due to offer 10 billion rubles ($152 million) of floating-rate notes due in December 2017 at a sale today.

Derivatives investors are also betting on more easing. The three-month MosPrime rate, which large Moscow banks say they charge one another, may fall 168 basis points, or 1.68 percentage point, in the next three months, forward-rate agreements tracked by Bloomberg show. That compares with 121 basis points of decreases seen the day before the cut.

Last week’s reduction took the benchmark rate to 15 percent from 17 percent, clawing back less than a third of the 6.5 percentage-point December increase, the biggest since 1998. Inflation accelerated to 13.1 percent as of Jan. 26, according to the central bank. The pace of price growth may reach as much as 17 percent by March or April, according to Deputy Economy Minister Alexey Vedev.

‘Remains Tight’

Russian monetary policy “remains tight,” Nabiullina told reporters in Moscow on Tuesday. Policy makers won’t fight inflation at “excessive” cost to the economy, she said. The next rate meeting is scheduled for March 13.

“The rate remains high for the economy, we understand that perfectly,” Nabiullina said. Inflation expectations easing in January and a degree of stability in the currency market allowed the central to reduce the rate, she said.

Economists see a 30 percent chance Russia will impose capital controls, the survey showed. Net outflows soared almost 10-fold from the previous three months to an estimated $72.9 billion in the fourth quarter, pushing last year’s total to $151.5 billion, according to the central bank. That compares with $61 billion in 2013.

The rate cut “means only a tactical step, but not a change in strategy,” Oleg Kouzmin, an economist at Renaissance Capital in Moscow, said by e-mail. “The introduction of capital controls is very unlikely in Russia in the mid-term.”

GDP Outlook

The economy of the world’s biggest energy exporter is on the brink of recession, bleeding capital, undermined by last year’s oil-price plunge and squeezed by sanctions over the conflict in Ukraine.

Output may contract 3 percent this year with an average oil price of $50 per barrel, Economy Minister Alexei Ulyukayev said Jan. 31. Russian banks’ total net losses this year may reach 2 trillion rubles ($30 billion), or about one quarter of their equity, according to an Alfa Bank report published Monday.

Russia’s services industries from bank to mobile-phone companies slowed for a fourth month in January, according to data released on Wednesday in Moscow by HSBC Holdings Plc and Markit Economics Wednesday. The Russia Services Business Activity Index shrank to 43.9 in January, the lowest since May 2009. A reading below 50 signals contraction.

“There will be a decline in rates,” Dmitry Polevoy, chief economist for Russia and the Commonwealth of Independent States at ING Groep NV in Moscow, said by e-mail. “The economy and banks can’t function with the key rate at 15 percent.”