Head of the Monetary Policy Department at the Gaidar Institute, Evgeny Goryunov, believes that mounting price pressures were the key factor behind the Bank of Russia’s decision not to continue lowering the key rate. He discussed this in a commentary for RBC.
The Bank of Russia kept the key rate at 14% per annum, suspending its cycle of rate cuts. According to Evgeniy Goryunov, the decision was influenced by a noticeable increase in inflationary pressure. In July, core inflation reached 7% on an annualized, seasonally adjusted basis.
Another factor is the persistently high demand in the economy. Despite a slowdown, consumer and investment activity remain fairly strong. This is evidenced, in particular, by the continued growth of banks’ loan portfolios and the money supply.
At the same time, according to Evgeniy Goryunov, it is still too early to speak of a full-fledged reversal of the disinflationary trend. However, by the end of the summer, the balance of factors had shifted toward increased risks of rising prices.
“It is still too early to speak of a reversal of the overall disinflationary trends, but overall, as of the end of summer, the balance of macroeconomic factors has shifted toward increasing pressure on prices. Therefore, the possibility of a rate hike cannot be ruled out. At the same time, the most likely scenario at present is that the rate will remain at 14% at the next meeting on October 23,” noted Evgeny Goryunov.
According to the expert, the future trajectory of the key rate will also be influenced by the parameters of the draft federal budget for the next three years, which is expected to be submitted at the end of September.