Evgeny Goryunov on the Central Bank's decision to hold the key rate at 21%

The Bank of Russia left the key rate at 21%, which matched the expectations of most analysts, including our expectations. At the same time, the regulator noted that despite the decline in inflation observed in February-March, inflationary pressures remain high, so a longer period of high rates will be needed to achieve the target. Moreover, the regulator signaled that it may even be necessary to raise the key rate if disinflationary processes do not move fast enough.

At the press conference, the Governor of the Bank of Russia, Elvira Nabiullina, made it clear that in case inflation returns too slowly to the target, additional tightening of monetary policy will be required. Thus, we can say with a high degree of confidence that there will be no rate cuts at the next meetings, i.e. the beginning of the monetary easing cycle is pushed back to mid-summer.

Now the balance is unambiguously shifted towards disinflationary factors. Decreasing growth rates of consumer prices in February-March, declining inflation expectations, slowdown in lending (including reduction in lending to individuals), strengthening of the ruble, pronounced saving behavior of households — all these factors are working to reduce inflation. At the same time, there are no factors that would accelerate inflation. The source of inflation risks in 2025 is rather budgetary policy. High fiscal spending has been an important driver of money supply growth since early 2025 and this was surely taken into account when the regulator was deciding what signal to send about future rate movements. The Ministry of Finance aims to achieve a zero structural primary deficit in 2025, which implies a significant reduction in government spending in the next three quarters of this year. In case such a reduction is not achieved, a longer period of high rates awaits us.