By Alexander Marrow and Elena Fabrichnaya
(Reuters) - Russia will keep interest rates on hold at 7.5% in 2023 as inflation ends the year above target and the economy grows marginally, a Reuters poll showed on Tuesday, with analysts split on whether the central bank's hawkish stance is justified.
The Bank of Russia kept the possibility of rate hikes on the table at its meeting last Friday, saying that any sign of a threat to its goal of returning inflation to the 4% target in 2024 would be met with monetary tightening.
The average forecast of 14 analysts and economists polled in late April and early May saw the Bank of Russia's key rate ending 2023 at 7.5% before dipping to 6.5% next year. Forecasts for 2023 ranged from 6.5% to 8.5%.
"Risks of stronger inflation in the second half of the year remain high due to the budget deficit, weakening rouble and the expected activation of retail demand," said Promsvyazbank analysts.
"Given the strong pro-inflationary risks, there is no room for a key rate cut as that may hinder fulfilling the goal of anchoring inflation around the target in 2024."
Others believed rate cuts were possible.
"(Central Bank Governor Elvira) Nabiullina's verbal signals about the directionality of the board of directors' discussions (on holding or raising the key rate on Friday) are somewhat alarming to us due to the lack of solid assumptions," said Rosbank analysts.
They forecast the key rate to end the year at 7%.
MARGINAL GROWTH
Analysts have steadily improved their forecasts for Russian gross domestic product (GDP), now envisaging growth of 0.1%, up from an expected contraction of 0.9% seen a month ago.
The central bank raised its forecast on Friday and the International Monetary Fund (IMF) is among those expecting growth in 2023, although it expects global isolation and lower energy revenues to dampen Russia's economic growth prospects for years to come.
Blunting the impact of sanctions are rising military production and huge state spending, allowing Moscow to plough on with what it calls its "special military operation" in Ukraine. Russia's GDP fell 2.1% in 2022.
Analysts see annual inflation, which has dropped below target against double-digit price rises in 2022, ending this year at 6.0%, the same as in the previous poll.
The average of forecasts in the poll suggested the rouble will trade at 79.00 against the dollar a year from now, up from a prediction of 75.00 in late March. Saturday's official rate was 80.51 roubles per dollar.
Most of the forecasts in the Reuters poll were based on around 10 individual projections.
(Reporting and polling by Alexander Marrow and Elena Fabrichnaya; Editing by Gareth Jones)