Central Bank potential for another rate cut in July
The Central Bank of Russia has announced a potential change in its monetary policy, with a significant key interest rate cut on the table for its July 2025 meeting. This decision comes after a prolonged period of maintaining a tight monetary policy, with the key rate previously held at 21% for some time.
The bank's decision was influenced by the ongoing decline in inflation and inflationary expectations. In April 2025, price growth slowed from 8.2% in Q1 to 6.2%, and core inflation also dropped to 4.4% from 8.9%. High-frequency data in May 2025 showed a further slowdown in price growth, implying a sustained easing of inflation.
Alexei Zabotkin, Deputy Chairman of the Central Bank, highlighted that despite domestic demand growth still outpacing supply capacity, the Russian economy is gradually returning to a balanced growth path. Monetary policy will remain tight for an extended period to ensure inflation returns to the target level of 4.0% by 2026.
In a recent statement, Zabotkin stated that if the data indicates a slowdown to 4% is consistent with a more significant step, such an option will be considered. He emphasised that the decision in July 2025 will be more significant than at the June meeting, depending on the data.
The Central Bank's decision in July 2025 will be based on the confidence that inflation is moving towards a trajectory to reach 4% in 2026. The balance of opinions among the Central Bank members will determine the decision in July 2025. The data on the economy, labor market, credit activity, inflation, and inflationary expectations will all play a role in the Central Bank's decision.
This reflects a cautious but optimistic approach by the Central Bank to balance economic growth with inflation control. The report by the "St. Petersburg Diary" suggests a possible change in the key rate by the Central Bank in July 2025.
The news report by the "St. Petersburg Diary" suggests a potential change in the Central Bank of Russia's key interest rate, possible due to a steady decline in inflation and inflationary expectations. This change, if implemented, could mark a shift in the bank's monetary policy, affecting both the finance and business sectors of the Russian economy.
