The Central Bank is preparing to revise the key rate. What you need to know

The maximum key rate of 21% is in effect in Russia for eight months. But already at the Central Bank meeting on June 6, it is possible to reduce it against the background of slowing inflation, against which many banks began to reduce deposit rates. How likely such an option is and what may force a reduction in the key rate is in the Izvestia article.

Inflation has slowed down

• A slowdown in price growth speaks in favor of lowering the key rate. Inflation in Russia for the period from May 20 to May 26 decreased from 0.7% to 0.6% compared to the previous week, and since the beginning of the year prices have increased by only 3.34%. In annual terms, inflation moved away from double digits for the first time: compared to May last year, it amounted to 9.78%, while in April it reached 10.23% over the same period.

• The slowdown in inflation was influenced by a seasonal decrease in the cost of vegetables and fruits — by an average of 0.8%: only cucumbers fell in price by 9%. The decrease was noticeable even though some vegetables, such as carrots, beets, and potatoes, increased slightly in price.

• Non-food inflation has also slowed. The price index in this area was negative (-0.05%), and wholesale prices for manufactured goods declined for the second month in a row.

• Along with lower prices by Russian manufacturers, the situation is also affected by the strengthening of the ruble, which makes imported goods more affordable in Russia. In addition, Chinese goods account for a significant amount of imports, and in China, a steady decline in prices has been noted for several months.

Breaking the trend: Inflation has finally started to slow down steadily

It is difficult to predict the Central Bank's decision on the rate so far

Rising prices in the service sector

• Despite the general slowdown in inflation, prices for services are rising, and this area is less dependent on external factors than trade and production. Inflation expectations of the population remain stable — according to the Central Bank, they amount to 13.4%.

• The harsh policy of the Central Bank has led to the fact that both the population and businesses have become less likely to borrow funds, and the overall credit burden has decreased. But if the key rate is lowered and credit activity returns, there is a risk that inflation will start to rise again.

Prolonged spring frosts can negatively affect the harvest, and this, in turn, will spur an increase in food prices. Additional inflationary risks are created by uncertainty in the foreign market due to the US tariff policy, lower oil prices and the threat of new sanctions.

Chances of a rate cut

• The slowdown in inflation in Russia occurred ahead of the regulator's forecast, so there is a high probability that the Central Bank will decide to reduce it at the June 6 meeting. In addition, the risk of a "hypothermia" of the economy and a deterioration in the financial condition of companies may prompt the Central Bank to ease its credit policy. Experts believe that the new rate could be 19%.

• At the same time, the uneven slowdown in inflation, primarily for non—food products, shows that the downward trend in price increases cannot be considered unambiguous. And the continued rise in food prices and the growing inflation expectations of the population may prompt the regulator to maintain the maximum key rate with the prospect of reducing it at the next meeting of the Central Bank.