Expert predicts Central Bank to raise key rate

It is likely that the Central Bank (CB) will raise the key rate at the next meetings, the effect of the measures can be seen in 2025. This was reported to Izvestia on December 17 by Yulia Khandoshko, CEO of European broker Mind Money (ex. "Tserih").

"The main reason why inflation has not yet been significantly reduced is that the money supply in the economy is growing faster than the supply of goods. Previously, this difference was compensated by imports from Western markets, but now the supply chain has changed. Import substitution requires time and significant investments, and it is impossible to instantly replace the previous volumes. At the same time, the government continues to support the economy by sending money to businesses and households, which stimulates consumption," she said.

The expert explained that the Central Bank, in turn, raises the key rate to reduce consumption. At the same time, the rate hike makes loans less accessible and deposits more favorable, which should lead to a decrease in activity in the market, he specified.

"However, the effect of these measures is not immediately apparent. The result will be seen only in 2025, when it will become clear how effectively it has affected the economy. For now, the Central Bank is forced to act on the basis of current statistics and trends," Khandoshko noted.

The Bank of Russia believes that frequent changes allow better adaptation of the economy and give the market to understand how events will develop, she said. In October, the rate has already reached 21% and there is a probability that it will be raised again at the next meetings, the expert added.

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Earlier in the day, portfolio manager of Alfa Capital Management Company Alexei Kornev told Izvestia that the Central Bank may raise the key rate at the upcoming meeting to 23%. This step may turn out to be the last in this cycle of monetary policy tightening, he specified. According to him, it is possible that the Central Bank may also use a softer signal at the December meeting.

Earlier, December 13, former head of the Central Bank Sergei Dubinin said that the regulator at the end of the meeting on December 20 may raise the key rate to 22%. He recalled that he had said many times that the increase in the key rate itself does not bring instant results in the fight against inflation.

The Central Bank's Board of Directors raised the key rate to 21% on October 25. Then, on November 19, the head of the regulator Elvira Nabiullina said that if Russia does not face additional economic shocks, in 2025 the Central Bank will be able to start reducing the key rate.