Cautious approach: how the key rate will change at the October meeting of the Central Bank

A regular meeting of the Board of Directors of the Bank of Russia will be held tomorrow, October 24, at which a decision on the key rate will be made. It currently stands at 17%, which is the minimum in the current decline cycle. Experts interviewed by Izvestia expect that the Central Bank will eventually keep the rate at the same level. We found out what will happen to the "key" by the end of the year.

What is affected by the key rate?

The Central Bank's key rate is the main instrument of monetary policy. It affects loans and deposits, inflation, economic growth in the country and the exchange rate of the national currency.

In simple terms, this is the percentage at which the Central Bank issues loans to commercial banks and accepts deposits from them, which, in turn, affects the cost of loans and deposits for businesses and citizens.

The regulator raises the "key" in case the prices of goods and services rise too fast. This makes loans more expensive, which makes them unprofitable for the population. As a result, both citizens and businesses start spending less money on purchases and investments and prefer to accumulate funds, including on deposits, which, on the contrary, become more profitable.

All this leads to the fact that the total turnover of money in the economy decreases, which provokes a slowdown in inflation. However, in this case, the development of the economy is also hindered, and therefore the Central Bank cannot keep the key rate high for too long.

The Central Bank of the Russian Federation holds rate meetings regularly, about once every six weeks. On them, he decides on which level the "key" will remain. The rate can not only decrease or increase, but also remain unchanged if the processes in the economy do not require the intervention of the regulator.

At the moment, the Central Bank is conducting a key rate reduction cycle. He switched to easing monetary policy in June, reducing the "key" by one hundred basis points, from 21 to 20% per annum. In three months, the Bank of Russia raised the rate to 17%.

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The regulator may take a pause in rate cuts until the end of the year.

The next decision on the key rate will be made tomorrow, October 24, 2025. And drastic changes should no longer be expected — the Central Bank has repeatedly noted that it may face the need for pauses in work to reduce the "key". The regulator argued that it would approach the rate decision with caution, taking into account the complex of factors observed in the Russian economy.

What decision will the Central Bank make?

The data released from the September meeting of the Bank of Russia suggests that the space for reducing the key rate in the remainder of this year has narrowed compared to the summer months. This point of view is expressed by VTB Chief economist Rodion Latypov.

— Inflationary expectations of enterprises have increased in anticipation of the VAT rate increase. Market inflation expectations, imputed to the yield of federal loan bonds (OFZ), have also increased, the expert explains. — At the same time, the labor market has also become tougher.

The current price pressure has increased, the Izvestia interlocutor emphasizes. The seasonally adjusted pace accelerated to 7% year-on-year in September. And, judging by the weekly statistics, the current price pressure remains elevated.

Ilya Fedorov, Chief Economist of BCS World of Investments, draws attention to the high rate of price growth in everyday goods financed by current income. At the same time, the cost of durable goods has been growing at a rate of 4% in the last three months.

The slowdown in the rate of decline in inflation, which has been observed recently, is in itself a reason to take a pause in reducing the key rate, says Sergey Khestanov, macroeconomist, associate professor at RANEPA.

"New sanctions risks are being imposed on this trend, the scale of which cannot be estimated yet," he clarifies. In this context, it is important how companies from friendly countries will react to the restrictions.

These risks may cause a noticeable weakening of the ruble, the expert admits, as a result of which a scenario of a moderate rate increase is not excluded. However, such a development seems unlikely to Khestanov.

Taking these factors into account, Ilya Fedorov expects the key rate to remain at 17% at the next meeting.

— The Bank of Russia will slow down the rate cut cycle after a surge in lending in July-August and an acceleration in inflation in September. The Central Bank will wait for the parameters to stabilize, especially against the background of data on fiscal policy, the expert believes.

Inna Litvinenko, Associate Professor of Economics and Management at the Russian State University of Social Technologies, agrees that the Central Bank will keep the rate at 17%. At the same time, she does not exclude the possibility that the Central Bank may move to reduce or increase the "key" by half a percent.

— But all the same, the probability of maintaining the key rate at 17% is much higher. This is confirmed by the fact that there are already a number of banks that offer deposits and deposits above the refinancing rate at the moment," the Izvestia interlocutor notes.

As for what will happen to the rate in the future, it is important to take into account that before the end of the year, in addition to the October meeting, there is another meeting to be held in December, she recalls. And no major changes can be expected by the end of the year.

Ilya Fedorov believes that the key rate will decrease by one percentage point in December. The Central Bank will be able to move to this as the situation with lending stabilizes, VAT is transferred to prices and budget spending slows down, he lists. The ruble exchange rate will significantly help in this process, which may turn out to be strong until the end of this year.

In addition, a rate of 16% at the end of the year can be expected if the new sanctions risks turn out to be small, warns Sergey Khestanov. And subject to a strong reaction from trading partners to the risk of secondary sanctions.

What will happen to the "key" in the future

Rodion Latypov expects that there will be significantly more room for reducing the key rate closer to the second quarter of 2026. This will happen against the background of disinflationary effects from changes in fiscal policy parameters.

— The key rate may decrease to 12-13% by the end of 2026, but it is at the upcoming meetings before the end of this year that pauses, in our opinion, are more likely, — the economist believes.

At the same time, the first half of 2026 may not be marked by a decrease in the "key", Inna Litvinenko does not exclude.

— We will see a progressive, systematic, gentle decline, spread over two years. The rate is likely to drop to 10-12% as a result. And it will be possible to talk about the 8-10% target only in 2027," the Izvestia interlocutor predicts.