As the Central Bank of Russia prepares for its upcoming meeting on April 25, 2025, experts predict that the key interest rate will remain unchanged at 21%. This decision comes amidst a backdrop of mixed economic signals, as inflationary pressures have eased somewhat, thanks in part to a stronger ruble. However, the sustainability of this currency strength remains uncertain, raising questions about the future of monetary policy.
In a recent discussion with Bankiros.ru, Egor Diashov, the head of the Financial Markets Commission at the Moscow branch of OPORA RUSSIA and director of the investment company DIALOT, expressed his expectations for the Central Bank's upcoming decision. "We assume that the key rate will remain at its current level at the regulator's upcoming meeting and may hint at a reduction in the second half of the year," he stated. This cautious approach reflects the Central Bank's desire to assess the effectiveness of its current monetary policy before making any significant changes.
Data from the Central Bank indicates that mortgage lending growth has continued to decline, with a 1.5% drop reported in the first quarter of 2025. This decline follows a period of robust growth, where mortgage lending increased by 13.4% in 2024. The trend is mirrored in consumer loans, which also saw a decrease of 2% during the same period. As the economy grapples with these shifting dynamics, the Central Bank faces the challenge of balancing monetary stability with the needs of a recovering economy.
According to Rosstat, GDP growth was recorded at 4.3% in 2024, but preliminary estimates for 2025 suggest a slowdown to 1.9%. Unemployment has also risen slightly, climbing to 2.4% after a record low of 2.3%, with expectations of maintaining a 2.5% level throughout 2025. These figures indicate a broader economic cooling, which the Central Bank must navigate carefully.
Inflation has shown signs of slowing, with a rate of 0.11% recorded from April 8 to April 14, maintaining an annual rate of 10.34%. Diashov remarked, "Overall, inflation is not showing a stable decrease and fluctuates from week to week. The Central Bank is monitoring the situation and will certainly be watching this dynamic closely." Experts anticipate that the consumer price index may begin to decline starting in the summer, with a peak expected in May.
Evgenia Vasilyeva, director of the Strategic Analysis Center at Ingosstrakh, shares a similar outlook, suggesting that the Central Bank is likely to maintain the current key rate during its April meeting. She noted that inflation expectations among the Russian population have risen to 13.1% in April from 12.9% in March, while perceived inflation has decreased to 15.8% from 16.5%. These mixed signals complicate the Central Bank's decision-making process.
As the Central Bank weighs its options, it is also mindful of external factors that could influence domestic economic stability. Geopolitical risks and potential declines in global oil demand due to trade wars add layers of complexity to the situation. Diashov emphasized that the Central Bank is in a wait-and-see position, wanting to confirm that the decrease in inflation is sustainable before taking any action.
The upcoming meeting is critical, as businesses have expressed dissatisfaction with the high key rate, which they argue hampers economic growth. "A high key rate is not favorable for businesses, and it remains unclear what the political dynamics will lead to," commented Natalia Pyryeva, a leading analyst at Tsifra Broker. She noted that while the current economic environment shows signs of normalization, the overall situation remains ambiguous.
Pyryeva further explained, "The strengthening of the ruble is one reason for the slowdown in price growth, but we expect the national currency to weaken in the second half of the year, which could counteract the current signs of cooling inflation." The delicate balance between controlling inflation and fostering economic growth remains a central theme in discussions surrounding the Central Bank's monetary policy.
Illya Fedorov, chief economist at BCS Mir Investments, also highlighted the turbulence in the global economy as a significant factor influencing the Central Bank's decision to maintain the key rate. He warned that trade restrictions could lead to a depreciation of the ruble and slower inflation reduction, complicating the outlook for monetary policy. "The Central Bank is likely to keep the key rate unchanged in April, but if risks do not materialize, a more substantial reduction could occur in June," he stated.
Denis Popov, an expert at the Analytical and Expertise Center of PSB, noted that while the trend toward gradual inflation reduction continues, it is premature to declare the process stable. He emphasized that inflation expectations remain high among both the population and businesses, despite a decrease in recent months. "The strong ruble is not a reliable anchor for inflation, especially given the noticeable drop in oil prices," he added.
Nikolai Kulbaka, an economist, expressed skepticism about the possibility of a rate hike, suggesting instead that the Central Bank is more likely to maintain the current level. He pointed out that businesses are actively lobbying for a reduction in the key rate, reflecting the pressure they face from high borrowing costs. "The interplay of political and economic forces is at play here, and while the economy currently holds sway, political considerations are always lurking nearby," he remarked.
The last time the Central Bank raised the key rate was in late October 2024, and since then, it has held steady through three consecutive meetings. This trend has surprised many experts, who anticipated further increases, particularly in December. However, the Central Bank opted to maintain the rate, and the decision has remained unchanged through February and March.
As the April meeting approaches, all eyes will be on the Central Bank's decision, which will set the tone for the future of Russia's economic policy and its response to ongoing domestic and global challenges. The delicate balance between managing inflation, supporting economic growth, and navigating political pressures will be critical as the Central Bank charts its course in the months ahead.
