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- There is no dispute about the rates: the Central Bank will not lower the key rate below 13% by the end of the year
There is no dispute about the rates: the Central Bank will not lower the key rate below 13% by the end of the year
Even after reducing the key rate to 14% at the July 24 meeting, the regulator is unlikely to be able to lower it below 13% by the end of the year, Izvestia calculated based on the updated forecast of the Central Bank. The average rate, according to the estimates of the Bank of Russia, in 2026 should be 14.5–14.6%. Moreover, inflation expectations jumped to 14.7% in July, which further limits the space for policy easing. What this means for loans, deposits, and businesses is in the Izvestia article.
What influenced the Central Bank's decision and forecasts
At a meeting on July 24, the regulator lowered the key rate for the tenth time in a row, this time by 0.25 percentage points, to 14%. At the same time, the Central Bank adjusted the macro forecast. Now the Bank of Russia expects that the average rate by the end of 2026 will be 14.5–14.6%, and in 2027 - 10.5–12.5%. This means that the space for further monetary policy easing remains very limited.
Chairman of the Bank of Russia Elvira Nabiullina
The new forecast suggests that the key rate is unlikely to fall below 13% by the end of the year, Izvestia estimates. With the already established average rate for January–July of about 15.1% in August–December, it should be about 13.7–14%, which is how much the Central Bank is planning. In general, this allows for a reduction in the key rate to 13% — and then only by the last meeting of the year. But it leaves practically no room for care below this level. Sergey Konygin, senior economist at Sinara Investment Bank, agrees: even if the Bank of Russia continues to cut the rate at each of the three remaining meetings of the year, it will not be easy to do this faster.
The decision itself was accompanied by tougher signals than the market expected. The Bank of Russia raised the inflation forecast for the end of 2026 to 6-7%, worsened the assessment of economic growth to 0-1% and at the same time raised the forecast for the key trajectory for the next two years. In addition, the wording about the possibility of further rate cuts at the next meetings disappeared from the release, which many analysts regarded as a signal of a more cautious approach.
At the same time, the decision to lower the key still became unexpectedly soft. The market predicted that the regulator would take a break amid rising gasoline prices, which could affect inflation. Against this background, the Moscow Exchange index rose and reached 2,188 points at the moment.
However, despite the acceleration of price growth caused, among other things, by the situation in the fuel market, the Central Bank nevertheless continued the policy easing cycle, as signs of a cooling economy become more noticeable. The decline in business activity, worsening expectations of enterprises, weaker demand prospects and a slowdown in lending allowed the Bank of Russia to take another step down, albeit more cautiously than at the beginning of the year, said Evgeny Zhornist, head of the Fixed Income Instruments Directorate at Alfa Capital Management Company.
The head of the Bank of Russia, Elvira Nabiullina, explained the decision by saying that the price increase is still temporary. According to her, estimates of stable inflation rates are still in the range of 4-5%, and the slowdown in demand limits the ability of companies to transfer rising costs to the final cost.
— Operational data indicate that the rise in fuel prices is beginning to spread to prices for a wide range of goods and services. This predictably affected inflation expectations, which rose significantly in July. Gasoline is an important marker commodity, as it accounts for a significant share of the regular purchases of the population and in the costs of companies. But as the situation in the fuel market stabilizes, inflation expectations may go down," the head of the Central Bank noted.
In July, expectations for price growth rose to 14.7%. The Central Bank stressed that they can consolidate inflationary pressure, so policy easing should take place gradually.
Additional risks are created by higher budget expenditures, the continuing structural deficit of the treasury and the likelihood of secondary effects from rising gasoline prices. The actual budget expenditures are significantly higher than in previous years, and the primary structural deficit is likely to remain until 2028 inclusive, which requires a higher trajectory of the key rate, Nabiullina said.
What will happen to the bet next
The most likely level of the key rate by the end of the year is 13.75%, although there remains a small chance of a reduction to 13.5%, according to Alexander Golovtsov, head of the analytical department of the PSB Management Committee. A softer range of 13-13.5% was indicated in the Banks.<url>, the Stolypin Institute of Growth Economics and the Institute for Integrated Strategic Studies.
There are no prerequisites for a sharper decline now, the financial adviser and founder of Rodin agreed.Capital Alexey Rodin. At the same time, the determining factor is no longer so much the current inflation as the overall stability of the economy and the expectations of market participants for price increases.
Fiscal policy and external risks remain additional constraints for further rate cuts. Pressure may also be exerted by a faster recovery in lending, said Alexander Golovtsov, head of the analytical department of the PSB Management Committee. Similar risks are being discussed at the Sinara Investment Bank, where it is noted that in the autumn the Central Bank will take into account the updated parameters of the three-year budget, and their revision may affect the further trajectory of the key rate.
The regulator also notices external factors, including the escalation of the conflict in the Middle East. As Elvira Nabiullina explained in response to a question from Izvestia, no one doubts that the rise in logistics costs and supply disruptions really affect the global economy, but now the Central Bank pays less attention to these factors than it did three months ago.
The Central Bank will be able to lower the rate below 13% this year only if several factors are combined at once — a steady slowdown in inflation, a decrease in inflation expectations, a weakening of pro-inflationary risks and the absence of new external shocks, said the head of the Bank's expert analytics department.<url> Inna Soldatenkova. Moreover, in this case, the Central Bank will exceed its forecast. However, according to the majority of experts interviewed by Izvestia, the probability of such a scenario remains low.
What does this mean for loans, deposits and GDP
Keeping the key rate above 13% means that the cost of borrowed funds will remain high for at least several more months. Even with a further reduction in the rate, it is not worth waiting for a noticeable reduction in the cost of loans, according to the head of the Bank's expert analytics department.<url> Inna Soldatenkova.
Banks are reviewing the terms not only following the decisions of the Central Bank, but also taking into account the cost of their own funding, the level of risks and regulatory requirements, the expert explained.
Loans will remain expensive for households and businesses, which will continue to limit the launch of new investment projects, especially in civilian sectors of the economy, added Sergey Zaversky, head of the Analytical Research Department at the Institute for Integrated Strategic Studies. According to his estimates, with a key interest rate of 13-13.5%, the cost of corporate loans will remain at the level of 16-19%. And it will be even higher for Russians, especially for consumer loans.
At the same time, the profitability of deposits will decrease faster than the key one. Banks set the expected trajectory of monetary policy in advance, so deposit rates usually respond to market expectations ahead of the Central Bank's decisions, he noted. At the same time, the profitability of deposits is likely to remain attractive until the end of the year due to the competition of banks for customer funds, Inna Soldatenkova emphasized.
For the economy, maintaining a high rate means that recovery will remain slow. Companies will have to continue to review investment programs, taking into account expensive debt financing, so it is not worth counting on a noticeable acceleration of construction and the launch of new projects, says Igor Talalov, head of the investment analysis group at Accent.
An additional risk remains a slowdown in economic activity: the updated forecast of the Bank of Russia itself assumes GDP growth of only 0-1% this year. This means that the business situation will be difficult in the second half of the year, said Boris Kopeikin, Chief Economist at the Stolypin Institute for Growth Economics.
The main change was not the key one itself, but the expectations regarding its further trajectory, experts agree. If in the spring the market was counting on a more rapid easing of the Central Bank's policy, now the baseline scenario is a gradual rate cut while maintaining tight financial conditions at least until the end of the year.
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