The RBC published the forecast of Sergey Drobyshevsky, Principal Researcher at the Gaidar Institute, on the key rate decision, which will be made at the forthcoming meeting of the Board of Directors of the Bank of Russia on March 20. According to the expert, the regulator will continue the easing cycle of the monetary policy despite a number of new factors of uncertainty.
"In my opinion, the Board of Directors of the Central Bank will consider at its next meeting only one option for further key rate changes, that is, a further reduction. The discussion will focus solely on the size of the reduction," stated Sergey Drobyshevsky.
The expert focused on the inflation data, which, in his opinion, indicates the temporary nature of the price spike at the beginning of the year. "Weekly inflation dynamics suggest that the January spike was a one-off event, related both to the VAT increase and calendar effects (the traditional price revision at the beginning of the new year and the increase in regulated prices and tariffs). Therefore, I see no reason to pause the rate cut, or, even more so, to increase the rate," he noted.
Sergey Drobyshevsky focused on the impact of budgetary changes: plans of the Ministry of Finance to change the oil cutoff price in the fiscal rule, suspension of foreign exchange market operations, and spending optimization. He believes, these factors are not critical for the Central Bank's decision.
“The situation around budget execution, suspension of the fiscal rule, and uncertainty in the global oil market, in my opinion, are not currently an exclusive important factor that needs to be taken into account when choosing the rate, since a rate reduction is entirely consistent with solving these particular problems: a lower rate suits the Ministry of Finance for new borrowing, while revision of the fiscal rule and spending optimization should result in a reduction in borrowing volumes, and the price of oil and oil and gas revenues are likely to increase. None of this adds any new arguments for the Central Bank. Taking them into account would only be important if a rate hike option “were on the table”," the expert explained.
Sergey Drobyshevsky believes that macroeconomic trends, i.e., slowing economic growth and declining investment activity, are the key factors the Central Bank should now consider. He recalled that high interest rate last year was necessary to combat economic overheating, but the situation has now changed.
"According to our estimates, positive output gap has been closed by early 2026, and further economic cooling no longer seems optimal. Therefore, the Central Bank of Russia faces the challenge of finding a rate reduction trajectory this year that will ensure inflation falls to the target without depressing the real economy," noted Sergey Drobyshevsky.
Accordingly, the expert presented a forecast for the upcoming meeting on March 20, outlining a possible range for decision-making. "The possible range for consideration, in my opinion, will be 14.5-15%, and I believe it is possible to select the lower limit," concluded Sergey Drobyshevsky.