Monetary conservatism: why the Central Bank maintains a tight policy despite business demands
The Central Bank has been steadily implementing a phased reduction of the rate — the third in 2025 after a cut from 21% to 20% in June and to 18% in July. As Elvira Nabiullina noted, persistent inflation expectations and an acceleration in corporate lending have prompted a cautious approach.
Particular attention is being paid to risks related to fiscal policy and the geopolitical situation.
Business demands for a more substantial rate cut are justified by a severe downturn in key sectors. Alexander Shevelev (Severstal) reports a 14–15% decline in metal consumption, comparing the situation to the crisis of the 1990s. The Ministry of Economic Development supports this position, pointing to "substantial room for easing," amic.ru reports.
Budget execution for January–August 2025 shows a deficit of 4.2 trillion rubles (1.9% of GDP), which exceeds planned annual figures. Nabiullina directly linked the prospects for further rate cuts to the dynamics of the budget deficit.
Sectoral consequences
Construction sector: minimal effect from the cut.
Credit market: lagging adjustment of rates on retail products.
Banking system: maintenance of differentiated deposit rates.
The rate is expected to reach 13–14% by the end of 2025, provided inflationary processes and budgetary parameters stabilize.
The Central Bank’s policy is aimed at shaping a savings-oriented behavioral model and long-term macroeconomic stability, although this limits the real sector’s recovery prospects in the short term.
The actions of the Bank of Russia reflect the classic dilemma faced by central banks in emerging economies: the choice between immediate growth stimulus and ensuring long-term stability.
Experts believe that the current course indicates a priority on inflation control, which is consistent with global practice in conditions of worldwide uncertainty.
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Monetary conservatism: why the Central Bank maintains a tight policy despite business demands
The cut of the key rate to 17% on September 12 confirmed the Bank of Russia’s commitment to a conservative course, sparking a discussion about the balance between inflationary risks and the needs of the real sector. The regulator’s decision reflects a comprehensive approach to managing macroeconomic stability amid persistent uncertainty.