The Central Bank of Russia is preparing to announce its first key interest rate cut in three years this Friday. According to Bloomberg, economists believe that signs of easing inflation are opening the door for the beginning of a monetary policy easing cycle — a long-awaited move by both government officials and businesses burdened by high borrowing costs.
Five economists surveyed by Bloomberg expect the rate to be lowered by at least 1 percentage point. One of them forecasts a sharp 200 basis-point cut, while four others do not rule out the possibility that the regulator will leave the rate unchanged at the current record-high level of 21%.
Since October of last year, the Bank of Russia has maintained a tight monetary policy in response to persistently high inflation, which has remained twice the target level of 4%. However, recent months have shown a notable slowdown in price growth, increasing pressure on the central bank from the government’s economic bloc and businesses.
“We believe the meeting will bring good news for the market,” said Oleg Kouzmin, an economist at Renaissance Capital, who predicts the rate will be cut to 20%. “If the central bank keeps the rate unchanged in June, it will likely include, for the first time since April 2019, a clear signal that a rate-cutting cycle will begin at subsequent meetings.”
Economy Minister Maxim Reshetnikov has openly called for a rate cut ahead of the meeting, citing a cooling in certain economic sectors. According to him, some industries are already showing signs of decline, and high interest rates are holding back further growth.
Meanwhile, the Bank of Russia insists that the economy is “gradually returning to balanced growth” after two years of rapid expansion. It emphasizes strong consumer demand as a key reason to maintain tight monetary conditions.
Nevertheless, the central bank’s measures are beginning to yield results. According to internal estimates, seasonally adjusted annual inflation slowed to 6.2% in April, down from 7.0% in March. Renaissance Capital estimates that in May, the indicator was already close to the target 4%.
Data from the Economy Ministry shows that annual inflation has eased to 9.7%, below the Bank of Russia’s forecast of 10.1% by the end of June.
The rate decision is scheduled to be announced at 1:30 p.m. Moscow time on Friday, with a press briefing by Governor Elvira Nabiullina at 3:00 p.m.
Based on the central bank’s current forecast of 7–8% inflation for 2025, the policy model suggests that the rate could remain unchanged. However, as Dmitry Polevoy, investment director at Astra Asset Management, points out, actual inflation is tracking below projections. If the bank lowers its inflation forecast by even 50 basis points, the model would support a rate of around 19% for June–July.
Deputy Governor Philipp Gabunia stated last week, according to Interfax, that “the situation has changed” and that the central bank is considering “a wider range of options, both for the rate and for the accompanying signal to the market.”
In a recent report, the central bank acknowledged uncertainty over whether the slowdown in inflation is being driven by sustainable factors, such as more balanced demand.
According to Kouzmin, the regulator may need more time to “build conviction” that a rate-cutting cycle is justified — similar to last year, when it hesitated to raise rates.
Among the risks is the possibility of inflation re-accelerating if elevated price expectations persist. In May, those expectations rose for the second consecutive month, reaching 13.4%.
A stronger ruble has also played a significant role in easing price pressures, but Nabiullina’s team is concerned that temporary factors supporting the currency could soon reverse. Geopolitical instability — both related to the war in Ukraine and ongoing global trade tensions — continues to add to inflationary risks.
“Disinflation and a slowing economy are evident,” noted Dmitry Polevoy. “But for a rate cut to happen on Friday, the central bank needs to believe in a lower inflation path than it currently forecasts.”
According to Polevoy, in any case, the outcome of the June 7 meeting will be markedly more dovish than in April — either a rate cut accompanied by a cautious signal, or no change with a clear hint of a significant move in July.
This article was prepared based on materials published by Bloomberg. The author does not claim authorship of the original text but presents their interpretation of the content for informational purposes.
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