Interest rate remains unaltered for the fourth consecutive time by the Central Bank.
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The cats over at the Bank of Russia have kept their paws firmly on the key rate lever, maintaining it at a whopping 21% annually. That's the word on the street, straight from the regulator's official announcement. This marks the fourth consecutive decision to keep the rate sky-high, and it's been cruising at these heights since October last year.
Why the stubbornness? Well, inflationary pressures are still higher than a hawk's nest, although they're gradually starting to decrease. The domestic demand is outdoing the supply growth like a boss, while the economy seems to be finding its way back to a steady growth path, according to the Bank of Russia.
They also mentioned that they'll keep the monetary conditions tight enough to get inflation back to its target of 4% by 2026. Translation? A long, hard winter of tight monetary policy is on the horizon.
The upcoming decisions on the key rate will hinge on the speed and sustainability of inflation and the expectations surrounding it. In the most likely scenario, the average key rate in 2025 will float between 19.5-21.5%, followed by a drop to 13-14% in 2026, and finally a more comfortable 7.5-8.5% in 2027.
The updated mid-term economic forecast from the Central Bank keeps their inflation targets intact. They're expecting inflation to dip to 7-8% by the end of this year and settle at 4% in 2026, where it'll likely stay put.
As of April 21, the annual inflation rate, as estimated by the regulator, was a heady 10.3%. Inflation expectations across the population, businesses, and financial market participants remain elevated, working against a faster drop in inflation, according to the CB.
Despite this, the Bank of Russia expects inflationary pressure to keep easing in the coming months, thanks to a slowdown in lending and high savings activity.
The Board of Directors' next meeting, where the key rate discussion will happen, is scheduled for June 6, 2025.
Moscow, Natalia Petrova
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- In her report, Natalia Petrova mentioned that the Bank of Russia has maintained the key rate at a high level of 21% annually, which is expected to add pressure to businesses and finance.
- Despite decreasing inflationary pressures, the Bank of Russia is cautious about easing monetary policy, as they aim to keep inflation at the baseline target of 4% by 2026.
- The updated economic forecast by the Central Bank shows that the inflation rate, as of April 21, stands at 10.3%, which remains high according to Natalia Petrova.
- At the Board of Directors' next meeting scheduled for June 6, 2025, the discussion on the key rate will be crucial in determining whether inflation will be maintained at the current level or if there will be any easing.
