Evgeny Goryunov, Head of the Monetary Policy Department at the Gaidar Institute, commented on the Bank of Russia decision to lower the key rate to 16.5%. In his opinion, the regulator made a “balanced decision ”, which indicates the continuation of the cycle of monetary policy normalization.
The expert highlighted two key signals in the Central Bank's decision. "The 50-basis point rate cut indicates two things. First, the Central Bank is continuing the cycle of monetary policy normalization, i.e., no decision has been made to pause the easing of policy. This means that, overall, inflation and output dynamics are in line with the Central Bank's expectations. Second, the Central Bank notes that, due to one-off pro-inflationary shocks, the moment when the economy returns to its long-term equilibrium and the rate will return to a neutral level is being postponed. It is noteworthy that the Central Bank has recorded a revival in lending, which also indicates a longer process of returning the economy to a path of sustainable growth," said Evgeny Goryunov.
At the same time, the expert questioned the Central Bank's inflation forecast. "In addition to this, the Central Bank's assessment that sustainable inflation indicators will return to the target level only in the second half of 2026, while they are currently in the range of 4-6%, raises questions. With the current level of policy tightening, inflation should stabilize at the target level no later than the first quarter of 2026," said Evgeny Goryunov.