Central Bank: the probability of a key rate cut in 2023 has decreased

The Bank of Russia (CB) published a quarterly report on monetary policy. It follows from the regulator’s materials that the Central Bank may need a higher trajectory of the key rate compared to the October forecast to stabilize inflation at 4% in 2024.

The macroeconomic forecast notes that the balance of inflation risks is shifted towards pro-inflationary risks. The regulator associates pro-inflationary risks with the persistence of elevated inflationary expectations of the population, restrictions on the labor market, as well as the impact on aggregate demand of growth and accelerated execution of budget expenditures.

“In our updated forecast for this year and next, the ranges for the average key rate are increased by half a percentage point, to 7.0-9.0% per annum for 2023 and 6.5-7.5% for 2024. This does not rule out the possibility of a rate cut this year, but its likelihood and scale have decreased,” said Elvira Nabiullina, head of the Central Bank of the Russian Federation, in a statement. In 2025, the average key rate will be 5.0–6.0% per annum.

Earlier, the Central Bank predicted that in 2023 the average key rate would be in the range of 6.5-8.5%, in 2024 – 6-7%, in 2025 – at the level of 5.6%. First Deputy Chairman of the Central Bank Ksenia Yudaeva allowed change in the forecast of the key rate in 2023, taking into account the conjuncture of the oil and gas markets, as well as the final budget and sanctions restrictions.

More details – in the material “Kommersant” “Life has become better, expecting worse”.

Milena Kostereva