Predictions for the key interest rate of VTB Bank and the Central Bank of Russia for 2025 have become the subject of intense discussion, reflecting the anticipated shifts within Russia's economy.
Andrei Kostin, the head of VTB Bank, expressed optimism about the future of the country's monetary policy during his appearance on "Russia 24". He forecasts the key interest rate could lower to 19% by the end of 2025, potentially dipping even lower. "I believe there are all the grounds to hope for...a decrease of the rate to 19% and perhaps even slightly lower," Kostin stated, indicating this decrease would likely occur during the fourth quarter of the year.
Currently, the key rate stands at 21%, unchanged since October 2024. Kostin's optimism is rooted, he explained, in signs indicating inflation might be nearing its peak, with projections for inflation rates hovering around 7-8% this year. "Considering the current economic situation, we can expect credit policy to soften during the second half of the year," he commented, emphasizing positive trends such as contracting lending volumes.
Conversely, Dmitry Pyanov, the first deputy chairman of VTB, has expressed different sentiments. He conveyed his belief, stating, "We do not expect any reduction in the key rate throughout 2025." This view highlights the complexity of the economic environment and the uncertainty surrounding inflation's potential impact.
Herman Gref, head of Sberbank, also weighed in, speculating on the potential timeline for rate reductions. He stated, "Sberbank forecasts the beginning of the reduction of the key rate...in the second half of 2025." This proclamation aligns somewhat with Kostin's predictions but signifies varied perspectives from the banking sector's leadership.
The Central Bank of Russia is scheduled to hold several rate-setting meetings throughout 2025, and any changes made will depend significantly on economic developments and inflation metrics. The upcoming meetings are set for March 21, 2025, among others, where shifts based on macroeconomic factors might emerge.
Despite Kostin's positive projections, he has remained cognizant of the challenges facing the banking sector, anticipating bank profits could decline by 15-20%. He elaborated, "Banking institutions will operate more cautiously, with increased attention on client selection and monitoring of troubled loans." Such trends indicate the necessity for resilience amid economic shifts.
Looking forward, Kostin noted, "We see positive trends, including corporate clients’ adequate reserves derived from their own profits for possible reinvestment. The investment climate, reflected by stable growth trajectories since 2024, gives us hope for continued investment activity." This sentiment emphasizes VTB's positioning for stability and growth amid broader economic challenges.
Reflecting on the forecasts provided by the Central Bank, Kostin mentioned they expect the key interest rate to fluctuate between 19-22%, indicating the potential for both cuts and increases depending on inflation and economic behavior through the year. Previously, the Bank had considered the key rate may hold steady at 21% indefinitely; these revised predictions indicate acknowledgment of underlying economic shifts.
With predictions surrounding the key rate shifting, bank executives and economists alike will be closely monitoring inflation data, credit market responses, and broader economic indicators as the year progresses. The nuanced perspectives from Kostin, Pyanov, and Gref offer insights, portray contradictions, and paint a comprehensive picture of the banking sector's outlook heading toward 2025.
While Kostin remains optimistic for rate reductions, the uncertainty expressed by others reveals the dynamic and contentious nature of economic forecasting within the banking community and beyond. With substantial economic challenges still existing, including inflation control and prudent lending practices, all eyes will remain on Russia's financial leaders as they navigate these turbulent waters.