The analyst did not rule out the Central Bank keeping the key rate above 20% until the end of 2025

The scenario of the Russian Central Bank keeping the key rate above 20% until the end of 2025 is quite probable, according to Alina Poptsova, stock market analyst at Alfa Capital Management Company. She told "Izvestia" on December 10.

The expert noted that inflationary pressure in November - early December in the Russian economy was elevated.

"There is indeed a risk of additional tightening of the MPC (monetary policy. - Ed.) in the first quarter of 2025, because, firstly, pro-inflationary risks for the economy remain. Among them - tight labor market, as a result - strong growth of wages, as well as the risk of greater impetus for demand from the growth of budget expenditures," - said the analyst.

Secondly, she said, a more gradual tightening of the MPC, such as a rate hike in December and with a continued tight signal and/or another rate hike in February instead of an aggressive rate hike immediately to 25% in December reduces the risk of high volatility in financial markets and stress on the financial system as a whole. Steadying would also give the regulator flexibility to make a decision as early as next year, for example, to evaluate the data and pause if inflation or credit momentum slows enough, Poptsova explained.

Raising the key rate: why it is necessary and what it affects

The monetary tightening cycle is forecast to continue

"The scenario of keeping the key rate above 20% until the end of 2025 is quite likely, as the path to lower inflation next year will be 'bumpy' and not fast enough in pace to actively ease monetary conditions." The sustainability of economic growth through fiscal stimulus, pressure on exports and imports, and a weak ruble will act as obstacles in cooling price growth," the analyst concluded.

Earlier, on October 25, the Central Bank of the Russian Federation raised the key rate to 21%. At the same time, the regulator allowed a further increase in the rate, and also noted that inflation is formed significantly higher than the July forecast. The Central Bank added that the Russian economy continues to grow, but at a more moderate pace than in the first half of 2024. At the same time, monetary conditions continue to tighten.