The Central Bank will keep the key rate at 21% at the March 21 meeting, according to the Izvestia consensus forecast. Pressure on prices is gradually decreasing along with inflation expectations amid a slowdown in lending and an improvement in the labor market. Nevertheless, it is too early to talk about the sustainability of this trend: in order to confirm it, the regulator will have to maintain a strict policy at the next meetings. At the same time, even a softening of rhetoric can support the market and lead to an increase in the value of Russian securities. What will happen to prices in 2025 is in the Izvestia article.
How the Central Bank will change the key rate in March
The Central Bank will keep the key rate at 21% following the meeting next Friday, March 21, according to a consensus survey from Izvestia. All 28 analysts and market participants interviewed by the editorial board agreed that the regulator would leave monetary policy unchanged, despite the fact that Central Bank Deputy Chairman Alexei Zabotkin said on March 13 that the regulator was ready to consider the feasibility of raising the rate.
However, the market still believes that so far the conditions for either its increase or decrease have not developed, since a steady trend towards slowing inflation has not yet formed. At the same time, the market expects a softening of the rhetoric of the Bank of Russia.
"The intrigue lies only in the regulator's signal, which, taking into account the latest data, may soften," said Viktor Grigoriev, chief analyst at Bank Saint Petersburg.
The Central Bank may switch from a moderately harsh signal to a neutral one, which means that the regulator will stop talking about a possible rate hike at future meetings, said Olga Belenkaya, head of the macroeconomic analysis department at Finam. In this case, he will be able to explain under what conditions the PREP will begin to soften.
Experts view the current situation with inflation with a cautious positive outlook: price growth is slowing down, but very gradually, added Vladimir Chernov, analyst at Freedom Finance Global. In the first week of March, goods and services rose in price by an average of 0.11%, which is half as much as in the week from February 18 to February 24 (immediately after the previous decision of the Central Bank). Inflation expectations of the population are also gradually decreasing.
Nevertheless, weekly data is very volatile and depends on many factors, said Evgeny Zhornist, a representative of Alfa Capital management company. According to him, if the price increase decreased this week, the dynamics may not be so positive in the future.
It is important to look at the price dynamics for the whole of February — these data have yet to be received, Alfa-Capital emphasized. At the same time, any estimates of inflation are still a "rearview mirror": they show old trends, but they say very little about future changes, they noted. To do this, it is important to assess the overall state of the economy.
Why prices are rising in Russia
The volume of money in circulation is actively growing in Russia, said Dmitry Golubkov, Director of Macroeconomic Analysis at OTP Bank. The money supply per M2 (including cash and non—cash funds) amounted to 118 trillion rubles, which exceeds the figures of the previous year by almost 19% - this factor contributes to the acceleration of prices. This means that people are getting more money due to rising salaries and loans, and businesses are getting more money due to budget injections. When the amount of money increases disproportionately to the goods produced, the value of each ruble becomes cheaper.
The main reason for the price increase in the Russian Federation is that the demand of the population is outstripping the production of goods and services, which has been repeatedly emphasized in the Central Bank. The possibilities of the economy are severely limited by the shortage in the labor market and the lack of available "workers". Because of this, people are willing to pay more, while productivity does not increase.
Unemployment has remained at a historic low of 2.3% for a long time, said Mikhail Vasiliev, chief analyst at Sovcombank. In January, the situation improved, and this indicator increased, but only slightly (to 2.4%) — a stable trend has not yet formed. However, it is important that the share of unemployed Russians has stopped declining, said Rodion Latypov, chief economist at VTB Group. This creates an opportunity to mitigate the labor market situation.
At the same time, it was important for the Central Bank to slow down business lending in order to reduce the overall level of demand in the economy, recalled Vladimir Chernov from Freedom Finance Global. According to the regulator, in February, the volume of loans issued to legal entities decreased by one and a half times compared to January, which is a positive trend in the context of combating inflation.
How will the market react to the signals of the Central Bank
The ruble's strengthening by almost 25% since the beginning of the year has not yet been fully reflected in the inflation rate, Vladimir Chernov noted. According to the foreign exchange market (Forex), its exchange rate is currently near 86.5 per dollar. The strengthening of the ruble against major world currencies makes it cheaper to import goods into the Russian Federation — this factor has yet to reduce pressure on prices in the country.
The dynamics of the Russian market is now particularly dependent on news on the de-escalation of the Ukrainian conflict, which has become a real test for the Russian economy. The market froze in anticipation of news about the negotiations between Moscow, Washington and Kiev, said Daria Dinets, an economist at RUDN University. At the same time, the agenda may deteriorate sharply, which will affect both the ruble and Russian stocks.
However, judging by the regulator's recent comments, it, in principle, does not pay attention to the activity of US President Donald Trump in resolving the Ukrainian conflict. According to the head of the Central Bank, Elvira Nabiullina, it is not worth focusing on this until there are clear agreements between the parties.
The Russian financial market may grow if the Central Bank softens its rhetoric, Vladimir Chernov noted. This will lead to an increase in the value of Russian stocks, and may well support the strengthening of the ruble.
The slowdown in retail and corporate lending will allow us to consider reducing the key rate at the next meeting on April 25, said Alexey Okhorzin, Deputy Chairman of the Board of the Postbank. Vladimir Chernov is confident that the trend towards slowing inflation will continue until the end of the half-year. The situation will be supported by the seasonal factor: in the spring, vegetables and fruits, as well as grain products, become cheaper in the Russian Federation.
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