Sergey Drobyshevsky, Principal Researcher at the Gaidar Institute, shared his vision on the forthcoming decision by the Bank of Russia on key rate with the Expert publication. He believes that regulator is in a difficult situation, balancing between the need to contain inflation risks and the expectations of the market, which has long been accustomed to high interest rates.
According to Sergey Drobyshevsky, when making decisions, the Bank of Russia focuses primarily on the short-term dynamics of macroeconomic indicators. However, long-term goals, such as achieving the target inflation of 4%, also play an important role. The expert noted that inflation in Russia, although under control, is still far from the desired indicator, and probably it will be accelerated in the future.
“According to my estimates, based on the results of July the decline in the annual inflation rate will take a break, and year-on-year inflation will remain at 9.4%. The expert forecasted that taking into consideration this set of factors the most reasonable solution aimed at consolidating the trend towards lower inflation and reaching the target on the horizon of 1–2 years is to keep the key rate close to its current level with a slight reduction from current 20% to 19–19.5%, which should have more of a signal value that the Bank of Russia is prepared to lower the rate following the slowdown in inflation.”
