Evgeny Goryunov, Head of Monetary Policy Department at the Gaidar Institute, commented for telegram-channel ”Sovereign economy”, explaining the reasons for high neutral interest rate in Russia, and considered the conditions for start of its decline.
According to the Bank of Russia's estimates for 2026, the real long-term neutral rate in Russia is approximately 4.5%, and the nominal rate is approximately 8.5% with an inflation target of 4%. After 2022, the neutral rate increased and stabilized at a new level. Among emerging markets, Russia's estimated value remains one of the highest.
According to Evgeniy Goryunov, it is so far difficult to estimate the neutral interest rate with high precision. The differences between the applied methods, limited availability of required data, large number of factors determining the interest rate, as well as high uncertainty and structural changes in the economy, have an impact on the result. Therefore, the estimates obtained should be viewed primarily as a benchmark for monetary policy, rather than as an absolute indicator.
"A nominal neutral rate of 8.5% seems more than realistic for Russia. The Russian economy has demonstrated in recent years that, even with extremely high real rates, lending remains positive, and aggregate demand remains relatively strong. This means the economy can withstand high rates without recession or budget crisis. The actual neutral rate of 4.5% also does not seem prohibitively high. However, estimates of the neutral rate should not be considered as absolutes: it is an important benchmark for authorities, but not a precise figure that can be determined once and for all," says Evgeniy Goryunov.
The economist also noted the differences between long-term and short-term neutral rates. In his opinion, when assessing tight monetary policy, it would be most accurate to compare the current or expected key rate with current or expected inflation. From this perspective, the policy of the Bank of Russia in 2022 and 2024 was tight, although the goals of the rate increase during these periods differed. In 2022, sharp increase in the key rate to 20% was primarily aimed at stemming the outflow of deposits and the flight into foreign currency, while the increase to 21% in the fall of 2024 was aimed at cooling aggregate demand and curbing price growth.
Evgeniy Goryunov believes that a prolonged high interest rate remains the most likely scenario in the near future. To reduce the neutral rate, and subsequently the key rate, changes in the fundamental conditions of the Russian economy are necessary. Among the most important factors, the expert highlights a reduction in uncertainty, a de-escalation of military action and a reduction in attacks on civilian targets, as well as the normalization of fiscal policy and its return to a countercyclical regime.
According to Evgeniy Goryunov, particularly fiscal policy could have a positive impact on the situation in the near future. However, most other factors that could lead to a sustained decline in the neutral rate are related to more profound changes in the economic and foreign trade situation. Therefore, in his opinion, there is little reason to expect a quick return of the value of money to previous levels.