Economists estimated the likelihood of a key rate cut at the Central Bank meeting on July 24.

At its meeting on July 24, the Bank of Russia is likely to reduce its key rate by 25 basis points (bp) to 14% per annum. Denis Astafyev, an entrepreneur, fund manager and founder of the SharesPro fintech platform, told Izvestia on July 16.

In his opinion, a sharper decline — by 50 basis points at once — looks unlikely. The regulator is likely to continue to adhere to a cautious and gradual approach to monetary policy easing.

"The process of disinflation continues in the Russian economy. According to the estimates of the Bank of Russia, steady price growth in terms of annual rates is already in the range of 4-5%, which is close to the target level. In addition, at the June meeting, the Central Bank allowed for the possibility of further rate cuts while maintaining a downward trend in inflation, so the July decision may be a logical continuation of the chosen course," the expert said.

At the same time, Astafyev drew attention to factors that may force the Central Bank to act cautiously. Despite the slowdown in the current rate of price growth, annual inflation in June, according to the regulator, remained at about 6%, which is still higher than the target. In addition, inflationary expectations of the population and businesses remain elevated, lending is accelerating, and a more active government budget policy creates additional inflationary risks.

As an alternative scenario, the economist considers maintaining the key rate at 14.25% if the Central Bank deems it necessary to wait for more convincing signals of a steady decline in inflation. The expert considers the option of reducing by 50 bp to be the least likely.

According to him, the Russian economy needs more affordable lending, as the high cost of borrowed funds continues to deter investment and increases the burden on businesses and borrowers. However, too rapid a rate cut can lead to an acceleration of lending, an increase in consumer demand and increased inflationary pressures.

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"The most logical strategy for the regulator is to move in small, predictable steps, without giving the market a signal about the beginning of a rapid cycle of rate cuts, even if the overall policy vector remains unambiguously mitigating," Astafyev concluded.

Olga Popkova, an economist and managing partner of the Goldman and Po communications agency, presented another scenario. In her opinion, the most likely decision of the Central Bank at the July 24 meeting may be to keep the rate at 14.25% per annum.

She recalled that at the meeting on June 19, the regulator lowered the rate by 25 bps. This was the ninth consecutive decline, but the pace of monetary policy easing has slowed significantly compared to previous steps. According to Popkova, the space for further rate cuts has significantly decreased, which indicates a weakening of the steady disinflationary trend.

"Consumer prices rose by 0.87% in a month, and annual inflation was 6.02%, with the Central Bank's target of 4%. At the same time, the latest weekly data show a slowdown in inflationary pressure: from June 30 to July 6, prices rose by 0.31%, and from July 7 to July 13 — 0.17%," the expert said.

Another important signal before the meeting was the statement by the Chairman of the Bank of Russia, Elvira Nabiullina, about a possible revision of the forecast trajectory of the key rate. According to Popkova, if the forecast is changed, it will be more likely to increase due to increased pro-inflationary risks.

On June 19, the Central Bank of the Russian Federation decided to reduce the key rate by 25 basis points to 14.25%. As noted in the regulator, the trend towards easing monetary conditions remains, but their overall level remains tight. The head of Sberbank, German Gref, said on June 30 that the Russian economy was already overcooled and the Central Bank's key rate needed to be lowered.