A deft pause: the Central Bank may worsen the forecast for the key for 2027

Increased inflation risks became the main motive of the Central Bank, which decided to keep the key rate at 14% per annum. Following the September 11 meeting, the regulator took a break after ten such meetings in a row, at which it lowered the rate. Analysts interviewed by Izvestia expect that the forecast for the average key for 2027 may be raised against the background of rising fuel prices, logistical problems and a possible deterioration in the budget deficit plan. How the policy of the Bank of Russia will change is in the Izvestia article.

What was the Central Bank's rate decision in September

The Central Bank tightened the signal for the market and drew attention to the fact that the risks of accelerating inflation are increasing. The Bank of Russia interrupted the key rate reduction cycle and took a break at the September 11 meeting. The rate was kept at 14% per annum.

The reduction of the key rate was not discussed significantly this time, said the head of the Central Bank, Elvira Nabiullina, at a press conference following the meeting.

In July, seasonally adjusted price growth accelerated by more than half and amounted to 11.6% year-on-year, after an average of 5.3% in the second quarter, the press service of the Central Bank said. At the same time, both businesses and the public still expect a more active increase in the cost of goods and services, which supports inflationary risks.

The acceleration of price growth in the summer months was primarily due to the situation on the fuel market, Nabiullina said. In itself, this is a one-time factor, but it pushes up the cost of other goods.

At the same time, the Central Bank notes that the economy continues to grow at a moderate pace, and consumer demand, although it remains high, is gradually slowing down. This means that manufacturers' ability to produce goods and services is gradually catching up with demand, which reduces the likelihood of further price acceleration.

However, the ability of companies to increase output is still limited by record low unemployment, the regulator's press service said. At the same time, the shortage of personnel is gradually decreasing. This, in turn, should help slow down wage growth: previously, a rapid increase in household incomes supported consumer demand and increased inflation.

Now the risks of price growth prevail over the factors that may lead to its slowdown, the press service of the Central Bank said. In addition to the situation inside the country, the situation is also affected by the general acceleration of inflation around the world against the background of geopolitical instability, which sooner or later may affect Russia.

The federal budget for 2027 will also influence further decisions of the Central Bank. If the forecast for its deficit is increased, the key will need to be maintained at a higher level than provided for in the baseline scenario, the regulator warned.

"Any additional ruble in government demand puts us further away from lowering the key rate," said Elvira Nabiullina.

The Bank of Russia assumes that the Finance Ministry plans to move to a zero budget deficit later, the head of the regulator said in response to a question from Izvestia. The trajectory of its decline has not yet been announced, and the Central Bank is based on its own forecast — 2% in 2026, 1% in 2027 and 0.5% in 2028.

Based on these estimates, the Bank of Russia has raised its forecast for the average key interest rate for 2027-2029, Elvira Nabiullina said. If the government expands the budget deficit, it will require a tougher regulatory policy. The parameters of the new budget will be clarified by the end of September, the head of the Central Bank noted.

The next meeting of the Board of Directors of the Bank of Russia will be held on October 23. It is on this basis that the regulator will update the medium-term forecast, which will allow for a more accurate assessment of the rate trajectory for the next year.

How much can the average key rate grow in 2027

The current forecast of the Central Bank assumes that the average rate in 2027 will be 10.5–12.5% per annum. However, after the September decision of the regulator, the probability of an upward revision of this range increased. At the next meeting, the Bank of Russia is able to raise its upper limit. At the same time, the average key level may be in the range of 11-13% per annum, says Peter Arronet, chief analyst at Ingo Bank.

The probability of an increase in the average rate in 2027 is growing, as temporary factors are already affecting prices and affecting inflation expectations, said Ilya Fedorov, chief economist at BCS World Investments. If this pressure is maintained, it will be more difficult for the regulator to continue rapidly reducing the key.

The current forecast for 2027 of 10.5-12.5% per annum was initially intermediate and quite wide, it could be changed if inflation increased, said Natalia Milchakova, a leading analyst at Freedom Global. Therefore, if Rosstat data in September and weekly figures in October show an acceleration in price growth, it is possible that the Central Bank will raise the lower limit of the corridor to at least 11.5%.

If the forecast for the key rate is not raised in 2026, then this is likely to happen as early as 2027, says Mikhail Vasiliev, chief analyst at Sovcombank.

At the October meeting, the Central Bank will assess how seriously logistics problems and rising fuel prices have affected the economy, added Olga Belenkaya, head of the Macroeconomic Analysis Department at Finam. The regulator will compare the real demand and the volume of goods and services that the economy can produce. If there are fewer opportunities than the market needs, the Central Bank will be more careful to lower the rate.

At the same time, the risks of accelerating inflation will prevail by the end of autumn, according to Ingo Bank. The seasonal decline in food prices will gradually come to an end, while other pressure factors will remain noticeable. The impact on prices may also increase due to the gradual transfer of increased transportation costs to the cost of goods and the weakening of the ruble, said Oleg Abelev, head of the analytical department at the Rikom-Trust investment company.

What will happen to inflation and loan rates

By the end of the year, inflation may rise from the current 6.3% to 6.7%, predicts Mikhail Vasiliev from Sovcombank.

A further spike in October could lead to a freeze in deposit and loan rates for several months or even a slight increase, said Anton Pavlov, Deputy Chairman of the Board of Absolut Bank. Against the background of increasing competition for resources, banks are unable to significantly reduce them, so interest rates will remain at an elevated level.

The average maximum deposit rate in the top 10 banks by the end of August was 12.9%, Mikhail Vasiliev said. In the coming weeks, according to his estimates, the yield will remain in the range of 12.8–13%.

At the same time, depositors should adhere to a strategy with multiple deposits for different periods, the expert recommends. Long-term products allow you to fix still high rates in case the key rate continues to decrease, while short-term products provide an opportunity to take advantage of more profitable offers if banks start to increase profitability again.