The key rate remained on pause – Economics – Kommersant

The Bank of Russia once again kept its key rate at 7.5% per annum, explaining this by moderate price growth, lower inflation expectations, and higher-than-expected economic activity. This year, the regulator expects inflation at 5-7% (assuming its temporary decline below 4% in the coming months), and GDP dynamics – from a decline of 1% to growth also by 1%. The signal regarding further actions of the Central Bank was tightened today – the rate may be raised already “at the next meetings.”

At the first meeting of the Board of Directors of the Central Bank this year, as analysts expected, for the third time in a row left the key rate remains unchanged – at the level of 7.5% per annum. The decision was explained by moderate “in terms of stable components” growth rates of prices. The Central Bank clarified that they are growing due to “volatile components”, in particular due to the rise in the price of vegetables and the weakening of the ruble, fixed at the end of the year. As of February 6, annual inflation in the Russian Federation was 11.8% after 11.9% in December 2022.

Inflationary expectations of the population and enterprises, although they have decreased, still remain at an elevated level.

The regulator expects that in the coming months, due to the effect of last year’s high base, inflation may slow down and fall below 4%.

It should be noted that earlier the Ministry of Economy allowed such a decrease “for some time” in the second quarter. However, an increase in the rate of price growth will be gradually observed – by the end of 2023, the Central Bank predicts inflation in the range of 5–7%, expecting that the figure will return to 4% in 2024 and will already be close to this value in the future.

The pro-inflationary impact will have a slowdown in the global economy, increased trade and financial sanctions, which may weaken external demand for Russian goods. The Central Bank does not exclude that the influence of these factors, even in their current form, “may be stronger.” In the meantime, the Central Bank sees grounds for moderate optimism: at the end of 2022, the regulator estimated a decline in GDP at 2.5%. The forecast for this year is slightly improved – from a decline of 1% to the same increase (instead of the previously expected decline of 1-4%). Now, the Bank of Russia explains, the dynamics of business and consumer activity is better than October forecasts, although the possibilities for expanding production are limited by the state of the labor market. Against the background of low unemployment, the effects of partial mobilization and rising demand for labor in many industries, labor shortages are increasing. In 2024, GDP growth is expected by 0.5-2.5%, and in 2025 by 1.5-2.5%.

The Central Bank gave a tougher signal for the future: if pro-inflationary risks increase (which include an increase in budget spending), the regulator will assess the feasibility of raising the key rate “at the next meetings.” According to the published medium-term forecast, the Central Bank raised the expected level of the key rate this year from 6.5–8.5% to 7–9%.

Evgenia Kryuchkova