what will be the rate
At the recent Board of Directors meeting, the Central Bank is expected to shift its key rate from 9.5% to the 8.5%–9% range annually. Analysts have suggested a possible move of 0.5, 0.75, or 1 percentage point. This projection appeared in conversations with analysts at the financial firm BCX World of Investments. Rating agencies have weighed in too; Expert RA indicated the most likely corridor sits around 8.5% to 8.75% per year, while the bank described the level as the “Russian Standard” 8.5%–9%. Other institutions, including VTB Bank’s brokerage arm, VTB My Investments, Absolut Bank, and the Higher School of Economics, anticipate a cut to 9%. Representatives from the National Rating Agency and the Ural Bank for Reconstruction and Development expect a decline to 8.5% annually.
There is a trend toward cooler price growth with a local shift toward deflation. This supports a rate reduction on the scheduled date. Markets and researchers foresee the indicator moving from 9.5% toward 9%, with a possible endpoint near 8.5%. Some observers note the regulator could adjust the step size, creating a compromise of about 8.75% per year. The current yield curve for federal loan bonds remains largely beneath that level, suggesting room for movement.
Rosstat reported a price drop in June of 0.35%, marking the largest monthly decline since August 2017. On an annual basis, inflation cooled to 15.9% in June from 17.1% in May. The Ministry of Economic Development cited a stronger ruble and reduced consumer activity as the main deflation drivers, though the central bank cautions that this slowdown is not a deflationary trend. From July 4 to July 10, prices rose by 0.23%, according to Rosstat data.
Experts note that fruit and vegetable categories and certain non-food items have been central to easing prices. There are also risks that inflation could reemerge in the fall as demand recovers, seasonal factors fade, and the ruble softens. Grigory Zhirnov, Chief Economist at VTB My Investments, emphasized that a more measured policy stance is possible, as central bank representatives have hinted at returning to normal levels within roughly two years. He also pointed out that this year’s recession may be milder than some forecasts imply, potentially keeping GDP declines in the 5–6% range by year-end. Inflation expectations climbing toward 12.4% support a cautious approach to rate moves, according to the same analyst.
Historically, the central bank navigated a rapid tightening in 2021 and 2022. Starting with a March 2021 rate of 4.25%, the Bank raised the key rate to 9.5% by February 2022, the highest since 2017, and briefly spiked to 20% during sanctions-related pressures. Subsequent months saw the rate easing to 17%, then to 14%, 11%, and back to the 9.5% level by mid‑2022. The high‑tightening period created a framework for gradual normalization as economic conditions shifted.
What about deposits, loans and rubles?
Following a rate decision, consumer loan costs are expected to ease by about 1–2 percentage points, while deposit rates could fall by roughly 0.75 to 1 percentage point. Projections place deposits at as low as 14–15% and loans around 7–7.75% annually, contingent on policy steps and market reactions.
Observers expect deposits to react more quickly than loans. For instance, deposit rates might dip in the first week after the central bank acts, with loan rates following in the second or third week. The exchange rate path for the ruble is not anticipated to be heavily influenced by the rate decision alone; other factors are more likely to drive moves in the near term.
Contributors suggest that the ruble could strengthen further as export earnings remain robust and import activity recovers, offsetting potential fiscal interventions. The overall stance remains cautious, with currency movements driven by a mix of external demand, trade balances, and policy signals rather than a single rate shift.
What will the rate be at the end of the year?
Analysts see a continued easing trajectory into late 2022. Some forecast a rate near 7.5%–8% by December, while others anticipate a touch higher, around 8%–8.5%. The consensus ties the path to slowing inflation, subdued economic activity, and ongoing demand weakness. Industry insiders suggest that if inflation cools further and growth remains sluggish, the central bank could reach roughly 7.5%–8% by year-end. Others project a path toward 7–7.5% in 2023 as inflation expectations settle and the economy stabilizes. The broad view remains that the central bank will pursue a gradual reduction, balancing price stability with growth considerations.
Overall, the central bank’s course appears to emphasize deflationary pressures and a slow transition back to a normal rate setting. Market participants will be watching inflation data, exchange rates, and the pace of demand recovery as key signals for future adjustments.