Analysts are predicting that the Central Bank of Russia will maintain its key interest rate at 21% during the upcoming meeting scheduled for March 21, 2025. Despite the recent strengthening of the ruble, experts caution against overconfidence, suggesting that this change may largely be market speculation regarding geopolitical dynamics and improving Russia-U.S. relations.
Olga Belenkaya, head of macroeconomic analysis at FG Finam, remains skeptical. In an interview with the Moscow Gazette, she stated, “The main scenario is to maintain the rate at the current level of 21% at the March 21, 2025, Central Bank meeting.” Belenkaya indicated that current inflation rates are still hovering around 10% annually, which does not warrant a rate cut, especially with other underlying economic pressures.
Inna Litvinenko, a member of the Public Council at the Ministry of Science and Higher Education, echoed similar sentiments, asserting that the strengthening of the ruble does not give grounds for raising the rate. “Inflation is not expected to fall below 10% this year,” she said, reinforcing the view that the Central Bank should maintain its cautious approach.
Financial analysts forecasted that if the Central Bank does eventually lower the rate, it would likely not occur until the second quarter of 2025. This prediction comes on the back of a modest drop in inflation expectations, which recently fell to 12.9%, down by 0.8 percentage points in the current month. However, this figure is still deemed relatively high.
Vadim Shamin, Deputy Director of the Development Department at Svoy Bank, addressed the complexities surrounding potential cuts. “A key rate cut is unlikely before the second quarter,” he noted, citing ongoing inflationary pressures that could impede economic recovery.
Maxim Petrunevich, head of macroeconomic and regional analysis at Rosselkhozbank, conveyed a similar perspective, indicating that the Central Bank lacks sufficient rationale to implement a decrease in rates just yet. “Despite the strengthening ruble and a slow pace in the decline of credit markets, inflation remains elevated,” he noted. Petrunevich projected that inflation by year-end could range between 5% to 7%, though uncertainties around the ruble’s exchange rate and prices of agricultural products could greatly hinder forecasts.
In light of these developments, an interest in long-term deposits continues to rise among consumers. Analysts from Banki.ru stated that in January and February of 2025, the share of one-year deposits represented approximately 15% of searches conducted on their platform. They listed the top performers: MTS Bank's 'MTS Deposit', Moscow Credit Bank's 'MKCB. Perspective', VTB's 'VTB deposit', and Bank Uralsib's 'Income', demonstrated increased popularity as consumers look for safe investment vehicles amidst economic uncertainty.
As various experts weigh in, the prevailing belief is that the Central Bank will continue its current strategy of keeping the rate unchanged. Eight analysts surveyed by the DP confirmed this, noting that the most likely outcome of the March 21 meeting is to maintain the rate at 21% per annum. Their anticipation comes amid high inflation expectations and a slowing economy, where the risks associated with increased food inflation and fluctuating ruble stability remain ever-present.
Denis Popov, a managing expert in the banking and financial markets analysis department at Promsvyazbank, stated, “There are no grounds for reviewing scenarios for lowering or raising the rate,” emphasizing the high inflation and demand exceeding supply, a scenario that pushes inflationary risks to the forefront.
Economic indicators remain uncertain; for instance, inflation in February registered a drop to 0.81%, down from 1.23% in January. This decline has not quelled concerns, as analysts continue to see fluctuation risks in the agricultural sector and labor market, both of which play crucial roles in inflation sustainability.
Looking ahead, should inflation trends stabilize and economic activity display more compelling signs of easing, the Central Bank may find grounds to reconsider its monetary policy stance. Optimistically, some analysts view the third quarter of this year as a potential turning point for interest rate cuts, amid a clearer picture of inflation and credit growth.
Ilya Fedorov, chief economist at BCS World of Investments, projected a wider range for the key rate in 2025, estimating it could vary from a low of 13% to a maximum of 23%. He explained, “The extremes are tied to various scenarios, where a low of 13% suggests some internal struggles while a high of 23% reflects a more negative outlook for the economy.”
Given these sentiments, the upcoming March meeting of the Central Bank will be crucial in determining the course of monetary policy moving forward. The anticipation surrounding the board's decision reflects broader economic dynamics at play, both domestically and on the geopolitical stage.
