By Elena Fabrichnaya and Andrey Ostroukh
MOSCOW (Reuters) - Russia's central bank is expected to cut its benchmark interest rate to a fresh record low on Friday, as a lockdown to curb the spread of coronavirus and still-low oil prices cause the economy to shrink.
Sixteen analysts and economists in a Reuters poll of 29 experts said they believed the central bank would cut its key rate to 4.25%
Expectations for a rate cut, cemented by the economic crisis and subdued risks of higher inflation, were boosted last week by central bank governor Elvira Nabiullina, who said she felt there was room for lower rates in Russia.
"We consider her words to be a verbal intervention that is preparing the market for a 25 basis points rate cut on July 24," Alfa Bank said.
Central bank deputy governor Alexei Zabotkin told Reuters the bank will consider a rate cut on July 24 even though it has already used up much of its room to ease policy.
A 25 basis point cut is what "the money market is expecting from the CBR and thus such a decision is safer in terms of suggesting a more predictable market response," VTB Capital said.
Lower rates make lending cheaper and may lessen the economic contraction after the coronavirus pandemic, which has battered business and consumer activity. A partial lockdown across Russia has capped the risk of inflation substantially overshooting the central bank's 4% target.
Eleven experts in the poll expected the central bank to slash the key rate by 50 basis points. Two analysts predicted an on-hold decision.
"All in all, it seems that the easing cycle is close to its end in Russia," Nordea Bank said.
The central bank, which shifted to an accommodative monetary policy stance earlier this year, will also revise the range of interest rates it considers "neutral" from the previous 6-7%, Zabotkin said.
Despite the lowering of borrowing costs, Russian OFZ government bonds, popular among foreign investors, remain attractive compared to their peers.
Friday's rate decision is due at 1030 GMT and will be followed by an online media conference with Nabiullina, who is expected to shed more light on the monetary policy outlook and present new economic forecasts.