Summer rates stand: Central Bank to raise inflation forecast to 6-7.5% this year
The Bank of Russia is likely to raise its inflation forecast for 2026 to 6-7.5% at its meeting on July 24, experts interviewed by Izvestia believe. The regulator now expects annual price growth in the range of 4.5–5.5%, but the acceleration of inflation in June and the situation on the fuel market make this scenario less realistic. At the same time, the Central Bank is likely to keep the key rate at 14.25% and tighten its rhetoric, warning the market that the monetary policy easing cycle may be delayed. What rate to expect by the end of the year and when loans will be available is in the Izvestia article.
Why the Central Bank will raise its inflation forecast
The upcoming meeting of the Bank of Russia will become a reference one, which means that the regulator will update forecasts on inflation, the key rate and the state of the economy. That is why the main event for the market may not be a decision on the "key", but a revision of the macro forecast. Most analysts polled by Izvestia expect the Central Bank to raise its forecast for price growth from the current 4.5–5.5% to 6-7.5%.
The reason is the acceleration of inflation in June. According to Rosstat, the annual price growth has already reached 6%, and the weekly dynamics in July remains elevated.
Problems with fuel logistics have become the main driver of accelerating inflation. Now there are significant risks that the rise in price of gasoline and diesel will affect the cost of other goods, said Denis Popov, managing expert at the PSB Analytics and Expertise Center. Taking into account the current dynamics, the bank raised its inflation forecast for the end of the year from 5-5.5% to 7-7.5%.
Other market participants share similar assessments. Sovcombank expects prices to rise by 6.7% by the end of the year, Absolut Bank by about 7%, Freedom Global by 5.5—6%, and Gazprombank by 6-6.5%.
The main question now is not the jump in fuel prices itself, but how long this situation will last, analysts say. For the Central Bank, it is more important to assess possible secondary effects — how much this will affect the cost of other goods and services and whether it will affect the inflation expectations of the population and businesses, said Olga Belenkaya, head of Finama's macroeconomic analysis department.
Why will the Central Bank leave the rate at 14.25%
Due to increased pro-inflationary risks, a pause in rate cuts has become the main scenario for the market. Of the 13 experts surveyed by Izvestia, ten expect the Bank of Russia to keep its key rate at 14.25% on July 24. Three more allow for a 0.25% reduction. However, none of the survey participants considers a rate increase to be a basic option.
The main reason for the regulator's caution remains precisely the uncertainty surrounding the consequences of the fuel situation, analysts say. At the July meeting, the regulator probably will not yet have sufficient data to predict how long the logistics problems will last and how they will affect inflation and fiscal policy, explained Denis Popov from the PSB.
Earlier, the regulator stated that the situation on the fuel market is considered as a temporary phenomenon, Anton Pavlov, Deputy Chairman of the Board of Absolut Bank, recalled. However, in order to understand how long this problem will be, it will take time — at least until August, he noted.
Increased inflation risks are also associated with rising price expectations and soft fiscal policy, said Mikhail Vasiliev, chief analyst at Sovcombank. Russians and businesses have begun to expect faster price increases, which is why companies raise the cost of goods and services in advance. In addition, the government maintains high budget expenditures, which support demand in the economy. Also, the amount of money in circulation is growing faster than the Central Bank expected.
Even if the regulator decides to symbolically lower the rate, the further easing cycle will slow down, experts say. Pavel Biryukov, chief economist at Gazprombank, believes that the Bank of Russia's new forecast may suggest a higher growth trajectory than expected in the spring. The PSB does not rule out that a return to the rate cut will occur only in early 2027 after the easing of inflationary pressures.
At the same time, the tougher rhetoric of the Central Bank does not mean that the regulator is preparing to raise the "key", said Anton Tabakh, chief economist at the Expert RA rating agency. According to him, it's more about a slow rate cut and possible pauses between decisions.
Monetary policy easing should be a natural process based on macroeconomic indicators and a stable economy, Vladimir Putin said during a working meeting with the head of Yakutia, Aisen Nikolaev, on July 14.
Russian President Vladimir Putin and Head of the Republic of Sakha (Yakutia) Aisen Nikolaev during a meeting
Ilya Fedorov, chief economist at BCS World Investments, believes that more clarity about the future direction of the Central Bank's policy may appear by the September meeting. According to him, by this time the regulator will be able to better assess the primary and secondary effects of rising fuel prices and their impact on inflation.
What will happen to loans and deposits
Keeping the key one means that drastic changes in banking products are not worth waiting for yet. Attractive deposit rates will remain, and financial institutions will be more careful to reduce the cost of loans, said Maxim Timoshenko, Director of the Financial Markets Department at Russian Standard Bank. According to him, the conditions for loans and deposits will depend not only on the decision of the Central Bank, but also on its further signals. In addition, the high key rate will continue to support the ruble exchange rate.
Tight monetary policy will remain in place at least until the end of the year, which means loans will remain expensive, said Natalia Pyrieva, head of the analytical department at Digital Broker. According to her assessment, the current level of inflation and pro-inflationary risks do not yet allow us to count on a rapid easing of credit conditions.
The period of expensive money may be longer than previously expected, Viktor Grigoriev, chief analyst at Bank Saint Petersburg, agreed. According to him, the Central Bank will be able to return to lowering the rate only if inflation slows down steadily. If price increases persist and inflation expectations continue to rise, the regulator may have to abandon further policy easing or even consider tightening it.
In the meantime, Russian borrowers should prepare for the fact that loans will not become cheaper in the coming months. For depositors, maintaining a high key rate is good news, which means that deposit yields are likely to remain at an attractive level for a long time.
Переведено сервисом «Яндекс Переводчик»
