Anatoly Aksakov, the head of the RF State Duma Committee on the Financial Market, believes that there are opportunities to cut the key rate this year and the Bank of Russia may return to the issue of its reduction to 4% by the end of the year.
“The potential to cut the key rate this year remains, the regulator has every opportunity to reach inflation targets by the end of the year. Most likely, by the end of the year, there will also be a positive correction of inflation expectations – this, among other things, will be facilitated by the decision The Bank of Russia to take a break in the process of lowering the key rate, “he told reporters.
“Taking into account the mid-term forecasts for inflation and the possible reduction of uncertainty in world markets, the regulator may well return to the issue of reducing the key rate to 4% by the end of this year,” the head of the committee added.
As reported, the Board of Directors of the Bank of Russia at a meeting on Friday took a break in mitigating monetary policy, as expected, keeping the key rate at 4.25%. Analysts expected such a decision from the Central Bank. This is the second pause in monetary policy easing this year. After keeping the key rate unchanged in March 2020, the Central Bank resumed the monetary policy easing cycle in April, cutting the key rate by 50 bp. – up to 5.50%. This was followed by two more declines: in June by 100 bp. (up to 4.50%) and in July by 25 bp. (up to 4.25%).
The Central Bank notes that in recent months, the growth rate of prices as a whole has developed slightly higher than its expectations, mainly due to the active recovery in demand after a period of self-isolation, as well as the weakening of the ruble due to a general increase in volatility in world markets and increased geopolitical risks.