MOSCOW (Reuters) - U.S. President-elect Donald Trump should first scrap penalties against Russian banks when considering lifting other sanctions against Moscow, chief executive with Russia's No.2 bank VTB said on Thursday.

Andrei Kostin, who heads the VTB bank included into the Western sanction list in 2014, said he expected the Russian central bank to cut its key interest rate to 8.5-8 percent by the end of 2017 from 10 percent at present.

Speaking at a panel discussion at the World Economic Forum in Davos, Kostin added that consumer inflation in Russia may slow below the central bank's target of 4 percent by the end of the year.

(Reporting by Katya Golubkova; Editing by Andrey Ostroukh)