RSPP head permits key interest rate to decrease to the range of 13-15% by year's end.
Informal take:
So, the bigwig of the Russian industry folks, Mr. Alexander Shokhin, ain't mincing words: the current inflation rate is causing a chill that might turn into an icy freeze. In an interview with TASS, he warned that if the Central Bank of Russia (CBR) holds off on cutting the interest rate until September, the drop come fall should be more than just a single percentage point - it's gotta pack a punch.
He reckons if the CBR pulls this off, the rate should have a real impact on different sectors, especially industry. He believes if we play by a formula where the rate should be twice the inflation rate, and the Ministry of Economic Development's forecast shows an inflation rate of 7-7.15% by the end of the year, then the key rate "shouldn't exceed 15%." According to Shokhin, such a rate would be golden for businesses and the federal budget.
On June 6, the CBR made the first rate cut in nearly three years, bringing it down to 20%. Before that, it had stood at 21% since October 2014. The CBR stated that while the inflationary pressure is still high, it's decreasing. The next CBR meeting to discuss the rate is scheduled for July 25.
Russian president, Vladimir Putin, speaking at the St. Petersburg International Economic Forum 2025, shared that the inflation trend is better than many experts and the CBR anticipated. This has given them the green light to ease their monetary policy a bit. As of June 23, Russia's annual inflation rate was 9.48%, according to the Ministry of Economic Development.
Overall, it looks like the CBR is expected to keep slicing that interest rate throughout 2025. They might cut it again in July and September, aiming for rates around 18% by September and possibly 13-15% by the end of the year. They're being careful, though, to prevent excessive credit growth and to maintain a balance between easing the burden on businesses and avoiding any rebirth of inflation or credit excesses.
The published interest rate reduction by the Central Bank of Russia (CBR) in June is expected to have a significant impact on various business sectors, especially industry, as suggested by Mr. Alexander Shokhin, the bigwig of the Russian industry. If the CBR proceeds to decrease the interest rate further in July and September as anticipated, the economy is likely to experience a more substantial drop, which should benefit businesses and the federal budget.
