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- Step in place: The Central Bank will not lower its key rate below 12.5% by the end of the year
Step in place: The Central Bank will not lower its key rate below 12.5% by the end of the year
The key rate by the end of the year will be at the level of 12.75–13%, experts polled by Izvestia believe. Before that, it was assumed that it would drop to 12%, but forecasts changed due to the signals that the Central Bank gave at the last meeting. Firstly, the regulator lowered the rate by only 0.25 percentage points (to 14.25%), although analysts and the market expected it to be reduced immediately by 0.5 percentage points. Secondly, the Bank of Russia made it clear that it would continue to treat monetary policy conservatively. And it's not even about the current inflation. The Central Bank's main concern is the budget, whose deficit has grown to 6 trillion rubles in five months, with half the figure set out in the plan. How the country's economy will develop in such conditions is described in the Izvestia article.
The Central Bank's key rate decision in June 2026
Last Friday, June 19, the Central Bank lowered the key rate by only 0.25 percentage points to 14.25%. At the same time, the market expected a more noticeable decrease — by 0.5 percentage points, and the president of the country had previously said that the rate should be reduced. Therefore, in conditions of a two-digit key rate, a step of 0.25 percentage points can be considered scanty.
Moreover, the Bank of Russia has also given a very strong signal regarding its future decisions. At a press conference, Chairman Elvira Nabiullina, who had not appeared at public events for several weeks, and her deputy chairman Alexei Zabotkin said that the space for reducing the key rate had shrunk, and in July the regulator could revise the forecast for the average rate for the year up.
When making monetary policy decisions, the Central Bank looks primarily at inflation. However, now the situation with her looks under control. The release following the meeting notes that if in the first quarter the price increase was 8.7% year-on-year, then in April-May it slowed down to 2.1%. At the same time, Elvira Nabiullina stressed that this is largely due to "one-time factors."
"The estimate of stable inflation has decreased slightly in recent months, but it is still in the range of 4-5% in annual terms, and annual inflation as of June 15 was 5.6%," the Central Bank said in a release. That is, the current price increase does not cause significant concerns.
However, the regulator still sees significant risks. They are associated with high inflation expectations and a prolonged period of wage growth, as well as a deterioration in the global economic outlook and increased global price pressures amid geopolitical tensions. In addition, the situation is heating up due to a temporary decrease in the production of motor fuel, the Central Bank stressed.
But the main risk, according to the Central Bank, is related to treasury spending. By the end of January – May 2026, the federal budget had a deficit of more than 6 trillion rubles, which is 3 trillion more than last year's figures and almost twice as high as those included in the annual plans.
"The base scenario of the Bank of Russia assumed that in the medium term, fiscal policy would help slow down inflation. However, maintaining the primary structural budget deficit until 2029 may require a tighter monetary policy than in the baseline scenario," the release emphasizes.
— Regarding the risk of revision of the parameters of fiscal policy, we can say that, in fact, it is already being implemented. But there is still uncertainty about its scale," Elvira Nabiullina emphasized. — Fiscal and monetary policies simultaneously affect demand in the economy. If the contribution of fiscal policy increases in order to achieve priority objectives, then monetary policy should act as a stabilizer.
The rigidity of this policy, according to the head of the Central Bank, should be changed in order to "somewhat reduce the contribution of credit to aggregate demand" — only in this case can demand deviate from supply opportunities and a new round of inflation be avoided.
What will be the key rate by the end of the year
In connection with the decisions announced by the Central Bank, experts interviewed by Izvestia worsened their forecasts for the dynamics of the key rate for the end of the year. Previously, it was expected that it could drop to 12%. However, analysts now believe that in December 2026 it will be at the level of 12.75–13%.
After the June decision, the Bank of Russia has room for further policy easing, but its pace may slow down, said Vladimir Chernov, analyst at Freedom Finance Global. Most likely, the reduction steps will be smaller than expected.
— In the baseline scenario, the trajectory may be as follows: in July, we assume a decrease of another 0.25 percentage points, in September there may be a pause, and in winter the rate cut may accelerate. However, much will determine the budget, which is growing against the background of the ongoing Ukrainian conflict," explained Lyudmila Rokotianskaya, an expert on the stock market at BCS World Investments. — Recently, the government has been able to increase spending without officially adjusting budget parameters and discussing it with the State Duma. This raises doubts among the regulator about the sustainability of the current decline in inflation. Moreover, over the past two weeks, Rosstat has again begun to report an acceleration in inflation.
At the same time, the single-digit rate (9.75%) will be set no earlier than October 2027, independent expert Andrey Barkhota believes.
"High interest rates in the economy, despite the ambiguous effect, make it possible to maintain the appearance of stability, keeping the ruble strong and limiting inflation, putting pressure on consumer demand," he said. — The harsh rhetoric of the regulator indicates a reluctance to increase the likelihood of crisis processes going through the banking sector. We are talking about the outflow of deposits due to excessive rate cuts. Against the background of a decrease in the quality of the loan portfolio, this creates risks.
At the same time, the Central Bank's decisions have already been incorporated into loan and deposit rates, and therefore, the regulator's goal of achieving a balance between stimulating business activity, reducing inflation and maintaining macroeconomic stability is fully realized, added Mikhail Khachaturian, Associate Professor at the Department of Strategic and Innovative Development at the Financial University. As for the Central Bank's statements, they can hardly be called hawkish — they contain rather rational grains, which requires a sober assessment of both existing achievements and risks. Only in this case will the effectiveness of the decisions made be optimal.
For most civilian sectors of the economy that are not related to fiscal momentum, monetary conditions remain quite tight, Lyudmila Rokotyanskaya warned. The crisis phenomena are likely to worsen in these sectors, the expert believes. At the same time, the economy as a whole is projected to grow at about 1% this year.
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