Bank of Russia may cut key rate to 14% at Friday meeting — consensus forecast

At its previous meeting in April, the Bank of Russia cut the key rate for the third consecutive time since the beginning of the year, lowering it by 0.5 percentage points to 14.5% per annum

MOSCOW, June 17. /TASS/. The Board of Directors of the Bank of Russia may consider lowering the key rate to 14% per annum at its upcoming June 19 meeting, according to 21 of the 23 experts surveyed by TASS. In their forecasts, analysts noted that the June meeting decision could be influenced by a decline in annual inflation from 5.6% to 5.3% in May, as well as by the strengthening of the ruble.

At its previous meeting in April, the Bank of Russia cut the key rate for the third consecutive time since the beginning of the year, lowering it by 0.5 percentage points to 14.5% per annum. The regulator stated that domestic demand growth had moved closer to the economy's capacity to expand supply, while indicators of underlying price growth had yet to show a decline.

In early June, Bank of Russia Deputy Governor Alexey Zabotkin said that the regulator did not see additional room for key rate cuts. At the same time, he noted that the Board of Directors would assess the appropriateness of further reductions at upcoming meetings. He also stated that underlying inflation remains in the 4-5% range.

Rate-cut momentum losing steam

All 23 analysts surveyed by TASS believe that the Bank of Russia will lower the key rate on June 19. Only two analysts suggested that the cut could be smaller than 50 basis points, allowing for a reduction of just 25 basis points.

"At the June 19 meeting, the Bank of Russia will most likely reduce the key rate once again. It could be lowered by 0.5 percentage points to 14% per annum. This scenario represents our baseline forecast for the key rate trajectory, and we estimate the probability of its realization at approximately 85%. We believe several important factors may influence the June Board meeting, including the decline in annual inflation from 5.6% to 5.3% in May, as well as the strengthening of the ruble. The slowdown in inflation was largely driven by a pronounced seasonal decline in fruit and vegetable prices. A stable ruble and the resulting reduction in prices for many imported goods also create conditions for another interest rate cut," lead analyst at Freedom Global Natalia Milchakova said.

At the same time, she stressed that some warning signs should not be ignored. "For example, monthly inflation accelerated from 0.14% to 0.17% in May. Although this increase was smaller than the consensus forecast, it was partly driven by a 1.55% monthly surge in service prices, which was 3.3 times higher than the April level. During the first week of June, inflation rose by 0.2%, exceeding the entire monthly increase recorded in May. Russians’ inflation expectations increased from 12.9% to 13% in May, while perceived annual inflation rose to 15.1%. Therefore, the issue of a possible pause in rate cuts will likely be discussed at the Board meeting. However, a decision to suspend policy easing appears unlikely because disinflationary factors continue to exert a noticeable influence," she added.

Meanwhile, Sovcombank Chief Analyst Mikhail Vasilyev emphasized that the overall economic situation is developing broadly in line with the Bank of Russia's baseline forecast, allowing the regulator to continue lowering the key rate in standard 50-basis-point increments. "At the same time, while some indicators are tracking closer to the lower bound of the Bank of Russia's forecast range, such as inflation and economic activity, others, including money supply growth, are closer to the upper bound. In addition, pro-inflationary risks stemming from fiscal policy and the prolonged conflict in the Middle East remain in place," he added.

Olga Belenkaya, head of macroeconomic analysis at Finam Financial Group, said that over the medium term, pro-inflationary risks and uncertainties continue to dominate. These include fiscal policy parameters for both the current year and the medium-term outlook, accelerating money supply growth, corporate lending and consumer spending in the spring, the absence of a noticeable slowdown in wage growth, developments in the domestic fuel market, and the inflationary global consequences of the conflict in the Middle East. "Among the new factors, one can highlight Finance Minister Anton Siluanov's statement that this year's budget deficit may exceed the planned level and that a zero primary structural deficit may only be achieved by 2029. Nevertheless, given the current level of the key rate in both nominal and real terms, we believe the data support continued rate cuts," she said.

Confident half-step

According to Vasilyev, the Bank of Russia is expected to maintain a hawkish tone while leaving a dovish signal in place. He also expects the regulator to cut the key rate by another 50 basis points at its next meeting on July 24, bringing it down to 13.5%. Sovcombank forecasts the key rate at 12% by the end of the year, although risks remain skewed toward a higher figure.

Belenkaya also noted that the current forecast calls for the key rate to stand at 14% at the end of the second quarter of 2026 and at 12-13% by year-end, depending on the extent to which the pro-inflationary risks and uncertainties highlighted by the Bank of Russia materialize.

At the same time, Gazprombank Chief Analyst Pavel Biryukov said that the future path of monetary policy would depend on the extent to which inflation could accelerate as a result of higher prices for imported goods caused by changes in global logistics chains, as well as on developments in the foreign exchange market and lending dynamics.

Bank of Russia may cut key rate to 14% at Friday meeting — consensus forecast

Rate-cut momentum losing steam

Confident half-step

Market participants' forecasts: