Moscow Exchange Index Soars After Key Rate Lowering
Central Bank's move to decrease key rate to 20% drives Moss Exchange index past 2900 points.
In a fresh development, the Moscow Exchange Index has surged past 2900 points following the Bank of Russia's decision to slide the key rate, according to trading data.
Reaching an all-time high of 2910.52 points, the Moscow Exchange Index experienced a significant 1.9% surge. However, at 15:20 Moscow time, the index witnessed a slight dip of 0.87%, resting at 2831.7 points. Notable declines were seen in "Surgutneftegas" (-2.9%), AFK "Systema" (-2.8%), "Polymetal" (-1.9%), "Sovcomflot" (-1.4%), and MTS (-1.3%). On the flip side, "Positive Group" (+2.9%), "Severstal" (+1.2%), "Tatneft" (+1.1%), "Seligdar" (+1%), and "Saint Petersburg Bank" (+1%) observed growth.
At its June 6 meeting, the central bank decided to nudge the key rate down from 21% to 20%. This is the initial adjustment in the rate since October 2024 and the first reduction since September 2022. The regulator underscored that inflationary pressure persists, yet the economy seems to be moving towards a "balanced growth trajectory," despite the fact that domestic demand still overpowers supply expansion capabilities. The bank, however, promised to maintain a strict monetary policy for an extended period to ensure inflation falls back to the target of 4% by 2026.
BCS' Skepticism Eased
According to BCS, a cut in the key rate is a clear positive for the Russian stock market, which has faced a three-year discount to historical valuations. BCS Express expert Mikhail Zeltzer highlighted that the market has been pricing in a shift to rate cuts for weeks, thus geopolitical risks and sanctions threats were swiftly absorbed. Zeltzer foresees a process of lowering the discount rate in valuation models and corporate securities, which may initially make the index volatile, followed by a more steady ascent towards 3000 points.
Cautious Optimism
"Tsifra Broker" considers the Bank of Russia's choice to gradually ease policy as a good sign for the economy and the stock market. Simultaneously, "T-Investments" chief economist Sofia Donets points out that "today's decision marks a turning point," and "a path for further monetary policy easing is unfolding." Donets cautions that if the ruble weakens by the July meeting, the proceedings could become more complicated.
Underlying Economic Trends
The Bank of Russia's move to trim the key rate comes after a prolonged spell of ultra-tight conditions, with the rate standing at 21% — a two-decade high. The decision stems primarily from the easing of inflationary pressures, as inflation indicators, including core inflation, have steadily dropped from their peak levels seen earlier in 2025.
As the central bank signals confidence in a gradual easing of inflation and slower but stable economic growth, the Russian stock market is likely to react positively in the short to medium term. In spite of this, the effect will be moderated by the central bank's insistence on maintaining tight monetary conditions to exclude inflation from rebounding, which could cap any substantial upswing in stock prices. External factors like geopolitical tensions and sanctions continue to impact market optimism independently of monetary policy.
"BCS Express expert Mikhail Zeltzer anticipates a process of lowering the discount rate in valuation models and corporate securities within the Russian stock market, which may initially cause volatility but could potentially lead to the Moscow Exchange Index reaching 3000 points."
"The decision by the Bank of Russia to gradually ease policy, as considered by 'T-Investments' chief economist Sofia Donets, signals a turning point, and a path for further monetary policy easing is unfolding. However, Donets cautions that the course could become complex if the ruble weakens by the July meeting."
