The Central Bank of the Russian Federation kept the benchmark interest rate at 16% per year at its Friday board meeting, according to a press release published on the regulator’s website.
The statement noted that while current inflation pressures have eased since the autumn, they remain high. Domestic demand continues to outstrip the ability to expand production of goods and services. It remains too soon to judge whether the recent easing in inflation will be sustained. The central bank emphasized that its monetary policy stance will support the ongoing reduction of inflation in the economy.
Denis Perepelitsa, a Candidate of Economic Sciences and Associate Professor at the Department of Global Financial Markets and Fintech at the Russian University of Economics, Plekhanov, expressed anticipation about the decision of the National Bank.
He observed that the Bank of Russia maintained its key rate in an environment where inflation risks persist. Keeping the rate unchanged is viewed as a balance between curbing price growth and preserving lending capacity for businesses aiming to expand production, Perepelitsa explained.
Previously, Sergei Dubinin, a former deputy chairman of the Central Bank, told Socialbites.ca that the key rate would likely stay the same because current inflation trends were not shifting significantly.
For a second consecutive month, the annual inflation rate stood at 7.4%, according to Rosstat.
The report suggested that price increases have slowed, with early signs of growth deceleration appearing, though the trend is not yet stable. It is common for inflation to ease during an election cycle. Nevertheless, food prices remain volatile, given that the food sector accounts for a substantial portion of the consumer basket. Higher household incomes and strong demand enable producers to pass costs onto consumers. Inflation is projected to exceed both market and central bank forecasts, according to Ilya Fedorov, Chief Economist at BCS World of Investments. He also noted that tariff-indexation in June, which had not been executed for a year and a half, would contribute to inflation as well.
Fedorov added that the stabilizing measures implemented by the Bank of Russia have not yet fully materialized, a process that typically unfolds over three to five quarters.
He argued that a rate cut would likely occur no earlier than the second half of 2024, after the regulator evaluates the impact of the measures, the trajectory of food inflation, and the effect of increased tariffs on the cost of food services.
Perepelitsa noted that as geopolitical tensions ease and the domestic market strengthens with deeper import substitution, the central bank could reduce the rate and introduce an internal mechanism for pricing of products and raw materials. In the medium term, he suggested a gradual reduction to around 12–13% in the second half of the year.
Earlier, eight banking analysts and one economist had anticipated that the key rate would remain unchanged on February 16.