Russia Monetary Policy March 2024

Russia: Central Bank holds key policy rate stable in March

At its meeting on 22 March, the Central Bank of the Russian Federation (CBR) held its key policy rate at 16.00%. The move, which mirrored February’s decision, had been priced in by markets and followed a cumulative 850 basis points of hikes since July 2023.

The CBR’s decision to once again keep its policy rate at the over-one-decade high was a cautious move. Price pressures reached a one-year high of 7.7% in February (January: 7.4%): A strained labor market—amid military mobilization efforts—and robust domestic demand outweighing supply capacity have kept inflationary pressures elevated in recent months. Moreover, the CBR noted that, despite gradually declining, inflation expectations among households and businesses remain high. Against this backdrop, the Bank deemed it “too early to judge the further speed of disinflationary trends.”

The CBR’s communiqué was void of explicit forward guidance. However, the Bank reiterated that, in order to anchor the downward path of inflation towards the 4.0% target, “tight monetary conditions will be maintained in the economy for a long period.” In particular, the CBR determined that risks to the inflation outlook are tilted to the upside, stemming from the fiscal policy normalization path and unfavorable exchange rate movements—resulting from geopolitical tensions and international sanctions. That said, our panel expects the Bank to kick off its easing cycle as early as in Q2; our Consensus is for the policy rate to be cut by close to 400 basis points by end-2024; that said, there is a 700 basis point spread among panelists regarding the end-2024 policy rate.

The next meeting is scheduled for 26 April.

On the outlook, Goldman Sachs’ Clemens Grafe and Johan Allen said:

“We still believe that a cutting cycle will start in Q3, continuing at a gradual pace before rates return to neutral in 2026. However, in light of the uncertainty around the inflation outlook, we think risks are skewed to the upside.”

Meanwhile, analysts at Raiffeisen Bank International commented:

“Monthly CPI excluding seasonality declined vs peak levels of H2 2023. Still, inflation remains elevated. The CBR is in higher-for-longer rates mode. The key rate is being kept unchanged from December. The first key rate cuts could happen in H2 2024, but the CBR will likely act cautiously.”

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest