Russia's Sberbank sees more rate cuts, higher growth this year despite Ukrainian attacks

By Elena Fabrichnaya

MOSCOW, Aug 28 (Reuters) - Russia's central bank will continue cutting its key rate, lowering it to 13.5% from 14% by the end of this year, Sberbank's chief economist Alexander Isakov told Reuters, despite Ukrainian attacks on economic targets.

Sberbank, Russia's largest lender, also nudged up its 2026 economic growth forecast to 0.4% from 0.3%, citing a stronger-than-expected second quarter, and robust consumer and state demand.

"On the demand side, the drivers of growth remain the budget and the consumer duo. Their momentum is positive, but this may change," Isakov said, adding that fiscal spending would boost the economy by an amount equivalent to 2% of GDP this year.

The central bank raised its key rate in 2024 to combat inflation and has since faced criticism for contributing to a sharp economic slowdown.

In recent months, Ukraine has targeted Russian oil refineries, e-commerce infrastructure and grain export facilities.

The attacks caused petrol shortages, losses for tens of thousands of small businesses reliant on internet trade and a halt to grain exports via the Black Sea to major customers.

Even so, a rise in inflation fuelled by petrol prices, and higher inflation expectations linked to the attacks, did not prevent the central bank from cutting rates by 25 basis points in July.

"The basic scenario is that a rate cut in September is possible, followed by one pause before the end of the year, and then rate cuts at a pace of 25 to 50 basis points per meeting with pauses," said Isakov.

The central bank's next rate-setting meeting is on September 11, followed by meetings in October and December. Isakov said a "high degree of uncertainty" still surrounds the outcomes.

He also said the rouble, which has weakened 15% to about 80 per dollar since May, is expected to weaken further to between 86 and 88 per dollar by year-end. His full-year inflation forecast remains unchanged at 6.5%.

(Reporting by Elena Fabrichnaya. Writing by Gleb Bryanski. Editing by Mark Potter)