Economist does not rule out lowering the key rate of the Central Bank of Russia in 2025

The Central Bank of the Russian Federation (CBR) is likely to start lowering the key rate in 2025, because the effect of tightening monetary policy will begin to manifest itself, Maxim Chirkov, associate professor at the Department of Economic Policy and Economic Measurements of the State University of Russia, told Izvestia on December 24.

Earlier in the day, the Central Bank said that lowering the key rate currently poses a threat to the economy.

Chirkov explained that so far the danger of lowering the key rate lies in the potential growth of inflation.

"The reason for the high rate is the elevated inflation rate, which differs from the target - the Central Bank's target - of 4%. In this sense, given that it is far from reaching the target - inflation is currently about 9% in Russia - it is difficult for the Central Bank now to forecast any reduction in the key rate," the economist said.

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At the same time, he clarified that there are still some successes in the fight against inflation. At the same time, the expert suggested that the key rate in 2025 is likely to begin to decline, because such actions, such as tightening monetary policy, has a delayed effect that will begin to manifest itself.

"In addition, other actions by various executive authorities in Russia will also have a restraining effect on inflation, in particular it may be restrictions on exports of some products. [Along with this] we have a mandatory sale of foreign currency proceeds for some companies from certain industries. Therefore, a set of measures may well help the Central Bank, Russia as a whole, to reach this target of 4%," Chirkov emphasized.

He added that from the statements of the Central Bank's representatives it follows that for the regulator the aspiration to the target of 4% is becoming less rigid. Therefore, according to the economist, the achievement of this target is unlikely to occur in 2025, but will shift to 2026.

On December 20, the Central Bank's Board of Directors decided to keep the key rate at 21% per annum. The regulator specified that there was a more significant tightening of monetary conditions than it was expected in October.