Analyst: The key rate may be lowered to 18% in the coming days.
The next meeting of the Board of the Central Bank of Russia will take place on July 25, during which a decision on the key interest rate will be made. Recently, there has been information in the media suggesting that it could be reduced immediately to 18%. An expert we spoke with shares the same opinion.
Olga Belenkaya, head of macroeconomic analysis at FG "Finam":
"Although the previous Central Bank meeting resulted in a neutral signal (which theoretically means the possibility of a decrease, maintenance, or even an increase in the key rate at the next meeting), there is virtually no doubt that at the upcoming meeting, the key rate will be lowered again. Central Bank Chair Elvira Nabiullina suggested in early July that the main question would be whether to move the rate down. The Central Bank leadership did not rule out a reduction of more than 100 basis points on July 25. In our opinion, the main scenarios could be a decrease of either 100 or 200 basis points, that is, down to 19% or 18%. An intermediate option of a 150 basis point decrease is also possible."
The analyst noted that, in her view, the most likely option is a 200 basis point cut. "The real key rate is now very high by all criteria, which is slowing down economic activity, and unevenly," she believes. However, the regulator might opt for a smaller step, such as 100 basis points.
In any case, a reduction is necessary, Olga Belenkaya emphasized: "In our opinion, the Central Bank should lower the key rate in response to the significant slowdown in inflation; otherwise, increasing rigidity of the monetary policy could lead to 'overcooling' of the economy and increasingly noticeable financial problems for enterprises."
Regarding the long-term forecast, the rate could be lowered to 15-16% by the end of the year, the expert believes:
"Our baseline forecast currently assumes a reduction of the key rate to 16% by the end of the year. If demand continues to weaken and no new inflationary risks emerge (for instance, from new budget forecasts, the external sector, or sanctions), a deeper reduction (for example, to 15%) is also not excluded."
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Analyst: The key rate may be lowered to 18% in the coming days.
A representative of FG "Finam" shared their opinion on what will happen to the key rate in July.