Faster rate reduction conditions discussed by Elvira Nabiullina
The Central Bank of Russia is set to make a significant move in its monetary policy, with expectations running high for a one percentage point cut in the key interest rate to 19% at its upcoming meeting on July 25. This decision, according to current inflation trends and economic indicators, suggests that inflation is moving within the central bank’s estimated range for 2025, forecasted to fall to a median of around 7% for the full year, down from 9.9% earlier, while economic growth is expected to slow to about 1.5% from 4.3% last year.
Central Bank Chief Elvira Nabiullina has indicated that if current trends continue, the bank will likely consider lowering the rate, and July will see an updated inflation and key rate forecast. Nabiullina emphasized the probability of a rate cut if no unforeseen negative developments arise.
Some experts predict that the key rate might decrease even further by the end of the year, potentially reaching 15-16% by December 2025, depending on inflation developments and other risk factors such as harvest problems or ruble weakening. For the upcoming July meeting, a cut of about two percentage points has also been mentioned by some specialists, but consensus leans toward a more moderate one percentage point cut at this point.
This cautious but optimistic stance by the Central Bank of Russia reflects a balancing act between inflation control and supporting economic growth under the current conditions. Deputy Governor Alexei Zabotkin suggested that a "more significant step" in reducing the rate could be considered at the July 25 meeting, compared to the June reduction of 1 percentage point.
The key rate was lowered by 1 percentage point on June 6, marking the first reduction in almost three years, and bringing it down from 21% since October 2024. Russian President Vladimir Putin stated that inflation dynamics are developing better than expected.
The decision on the key rate at the July 25 meeting will depend on data on the economy, labor market, credit activity, inflation itself, and inflation expectations. The Central Bank head, Elvira Nabullina, explained that indicators of investment and consumer demand currently indicate sustained high investment activity and a cooling of consumer demand. The Central Bank's statement said that current inflationary pressure continues to decrease, although it remains high.
A slowdown in the economy after several years of rapid growth is inevitable, according to the Central Bank head. However, the bank remains committed to maintaining a stable monetary policy that supports economic growth while keeping inflation in check. The next meeting of the Central Bank on the rate is scheduled for July 25. Putin stated that this allows for a "cautious easing" of monetary policy.
[1] [Central Bank of Russia Official Website](https://www.cbr.ru/) [2] [Russian Presidential Press Service](https://kremlin.ru/) [3] [Economic Expert Group](https://www.economicexpertgroup.com/) [4] [TASS News Agency](https://tass.com/)
- The cautious yet optimistic stance by the Central Bank of Russia, as outlined by Deputy Governor Alexei Zabotkin, suggests a potential further decrease in the key interest rate, which currently stands at 19%, to support both inflation control and economic growth.
- As experts predict, the key interest rate could decrease even further by the end of 2025, potentially reaching 15-16%, and this decision will heavily depend on data regarding the economy, finance, and business, including inflation, labor market, credit activity, and inflation expectations, as stated by the Central Bank head, Elvira Nabullina.
