Expert assessed the probability of raising the key rate by the end of 2024

The Russian Central Bank (CBR) is likely to raise its key rate to 22-23% at its December meeting. The question remains the potential width. This was reported to Izvestia on November 19 by Alina Poptsova, stock market analyst at Alfa Capital Management Company.

On November 18, the Central Bank published a material in which it reported that additional tightening of monetary conditions is required to reduce inflation.

Inflation expectations of the population and the assessment of observed inflation in November showed no growth, remaining at the level of October at 13.4% and 15.3% respectively. However, so far this is not enough to change the balance of risks in favor of less rigidity of the Central Bank, Poptsova pointed out.

In its review of inflation data, the regulator noted that most indicators of price growth had increased by September, while sustained inflationary pressures remain near this year's highs, she recalled.

"The Bank of Russia has reiterated the signal that additional monetary tightening is required to bring inflation back to target. This only strengthens the likelihood of further key rate hikes at the December meeting. The question remains, rather, the potential width of the increase - by 100 bps or 200 bps, to 22-23%. The Central Bank's forecast of the average rate for the rest of the year at 21-21.3% allows both of these scenarios," the expert explained.

According to Poptsova, the negative side of inflation can be partially offset by slowing lending, in the corporate segment the regulator already notes signs of weakening momentum, but this has yet to be confirmed in the data.

Earlier in the day, Central Bank Governor Elvira Nabiullina said that if Russia does not face additional economic shocks, the regulator could start cutting the key rate as early as 2025. She pointed out that such tactics of the Central Bank will allow to reduce inflation in the country to the level of 4.5-5% in 2025, and then stabilize this indicator at about 4%.

The Central Bank's Board of Directors raised the key rate to 21% on October 25. Nabiullina said that during the meeting three options were considered: to raise the rate to 20%, to 21% and higher. She specified that the condition of maintaining the level of the rate was not considered. Prior to that, the key rate was 19%.