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- Overstepping the threshold: The Central Bank will slow down the key rate cut due to the new budget rule
Overstepping the threshold: The Central Bank will slow down the key rate cut due to the new budget rule
The central bank will be able to reduce the key rate only to 13-14% this year at the new cut-off price (the cost of oil included in the budget calculation), follows from the consensus forecast of Izvestia. Finance Minister Anton Siluanov announced plans to tighten the budget rule on February 25. If the parameter is lowered to $45-50, it will increase the filling capacity of the "pot", from there they will spend money on important investment projects. However, the decision will put pressure on the ruble exchange rate and inflation, which will require the Bank of Russia to reduce its key rate more carefully. What is more important for the economy now is in the Izvestia article.
What will be the key rate in 2026
The Bank of Russia will be less active in lowering the key cut-off price in the budget rule from the current $59 per barrel, experts interviewed by Izvestia believe. If adjusted, the rate is expected to be around 13-14% by the end of the year.
The authorities use the cut-off price when replenishing the National Welfare Fund (NWF). When the price of export oil exceeds this threshold (in 2026 it is $ 59 per barrel), the surplus is sent to the National Welfare Fund — they are used to purchase foreign currency (mainly yuan), creating a "safety cushion". If the price of Russian Urals oil falls below the cut-off price, then funds from the "pot" go in the opposite direction: the currency is sold to finance budget expenditures.
Such a mechanism was invented to form state reserves in the "rich years", as well as to make the ruble exchange rate less dependent on the cost of oil. According to preliminary estimates by the Ministry of Finance, in January the treasury deficit amounted to 1.72 trillion rubles, while the financial plan for this year includes a shortfall of just over 3.7 trillion.
Against this background, on February 25, the Finance Minister announced that the government was going to tighten the budget rule by lowering the base price of oil. He explained that the share of oil and gas revenues in the budget is decreasing and will be less than 20%. In such circumstances, the Cabinet of Ministers wants to preserve the NWF and not put pressure on the foreign exchange market, the minister explained. As the Bloomberg news agency reported on the same day, citing sources, the cut-off price for oil will be reduced to $45-50 per barrel. Izvestia asked the Ministry of Finance to what level they want to reduce the indicator.
Reducing the cut-off price usually plays against the ruble, because the government buys more currency or gold for the National Welfare Fund on the domestic market, said Olga Gogaladze, an economist and financial markets expert. She clarified that the demand for the currency is growing, and therefore the ruble is getting cheaper. For example, on February 25, on the news about the cut—off price, the dollar rose by 1.9%, and the yuan by 2.1%, recalled Finam analyst Alexander Potavin.
In addition, with low oil prices, the Bank of Russia, on behalf of the Ministry of Finance, sells foreign currency from the National Welfare Fund to compensate the budget for the "shortfall" in oil and gas revenues, recalled Alexander Dzhioev, head of the macroeconomics and stock market group at Alfa Capital Management Company. Such sales create demand for the ruble, supporting its exchange rate. If the cut-off price is lowered, the volume of currency sales will decrease, which will weaken the exchange rate, he said.
The weakening of the ruble leads to an increase in the price of imported products, which leads to an increase in inflation. In this case, the import of goods from other countries becomes more expensive, from electronics to components, which Russia largely receives through China and parallel imports, said Denis Astafyev, fund manager and founder of the SharesPro fintech platform. According to him, this is directly translated into consumer prices.
At the last meeting on February 13, the Central Bank lowered its key rate by 0.5 percentage points to 15.5%. As Izvestia reported earlier, the rate may drop to 12-13% by the end of the year. However, experts now expect that the regulator will have to ease monetary policy more slowly due to a possible change in the cut-off price. The Bank of Russia may reach 13-14%.
The Central Bank's goal is to combat price increases, Olga Gogaladze recalled. If the ruble starts to fall rapidly due to the budget rule, the regulator will be forced to keep the rate high in order to bring down the inflationary impulse, she said. In this case, the Bank of Russia will carefully soften its monetary policy.
Izvestia appealed to the Central Bank with a question: do they see the risks of rising inflation due to the tightening of the budget rule?
What are the funds from the NWF spent on?
At the same time, the weakening of the ruble automatically increases revenues for the budget and exporters, Alexander Potavin noted. In addition, the lower the cutoff, the greater the amount of oil and gas revenues at the same actual Urals price is formally considered excess income and goes to the NWF, said Vladimir Chernov, analyst at Freedom Finance Global.
As of February 27, the ProFinance platform reported that Urals crude oil was trading at $59.28 per barrel. For comparison, at the beginning of 2026, raw materials cost almost 20% less — $50.44 per barrel.
— If the cutoff is reduced from $59 to $45-50, the difference will be about $9-14 per barrel. If Urals stays above the new cutoff for a significant part of the year, the additional inflow to the National Welfare Fund can be estimated at about 1.4–2.2 trillion rubles per year," the expert explained.
However, this is more of a sensitivity assessment: the final result will depend on prices, the ruble exchange rate, the discount on Russian grades of oil and export volumes, he believes. At the same time, the liquid part of the NWF is now above 4 trillion rubles, so the key goal of the Ministry of Finance is to reduce the risk of further depletion of the fund's funds, rather than simply increasing its volume, Vladimir Chernov said.
The most obvious effect of the tightening of the budget rule will be a reduction in the use of NWF funds to compensate for lost oil and gas revenues, agreed Alexander Dzhioev from Alfa Capital Management Company. Against the background of a reduction in the liquid part of the fund, it will be more difficult to maintain financing of the budget deficit at the same pace in the near future. And reducing the cut-off price will allow you to distribute the remaining "cushion" of liquidity for a longer period, the expert added.
Analysts interviewed by Izvestia believe that the option of reducing the cut-off price to $50 per barrel is realistic. The corridor to $45 is difficult to implement, as federal budget expenditures may be squeezed, said Svetlana Frumina, Head of the Department of Global Financial Markets and Fintech at Plekhanov Russian University of Economics.
However, they take money from the National Welfare Fund not only to cover the treasury deficit, but also to finance investment projects and pension savings. It was expected that 700 billion rubles would be spent on government initiatives in 2026.
In early February, the British news agency Reuters, citing sources, wrote that the Russian government was allegedly preparing to stop financing all state-owned projects from the National Welfare Fund. According to them, Gazprom's gas processing project in Ust-Luga may be an exception. However, the authorities have not confirmed this. The editorial board asked the Ministry of Energy and the Ministry of Finance whether this is really the case.
The Cabinet of Ministers will be more careful to spend funds from the "pot". Nevertheless, the authorities will continue to finance projects that have an immediate effect on the economy or import substitution, Olga Gogaladze believes.
The Ust-Luga project may become one of them, as it is not just a construction site, but a strategic facility for reorienting gas exports after the loss of the European market, Alexander Potavin noted. In addition, Olga Gogaladze continued, such areas as logistics (a turn to the East, the development of ports and railways), microelectronics and aircraft engineering remain priorities. They will also continue to be funded.
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