By Elena Fabrichnaya
MOSCOW (Reuters) – The Russian central bank will keep its benchmark interest rate on hold at a board meeting on March 21, all 29 analysts who took part in a Reuters poll predicted on Monday, since more time is needed for inflation to respond to the tight monetary policy.
Despite the key rate being at its highest level in over 20 years, a slowdown in corporate and retail lending, and a rally in the rouble, inflation remained stubbornly high at 10.1%, well above the central bank’s target level of 4%.
The rouble surged by 26% since the start of the year, mainly on expectations of a peace settlement in Ukraine. This surge followed talks initiated by the new U.S. administration, but analysts said uncertainty risks were too high.
“The geopolitical factor remains the main source of uncertainty for the forecast,” said Mikhail Vasilyev from Sovkombank.
The rouble rally could help to bring down inflation rates if the Russian currency stays at its current levels long enough for the exchange rate to have an impact on prices of imported goods.
The central bank said on March 11 that tight monetary policy would need to be maintained for a long time in order to bring about persistently low inflation, stressing that the normalization of budget policy was crucial.
Soaring government spending pushed Russia’s budget deficit to 1.3% of gross domestic product (GDP) in the first two months of 2025 compared with 0.6% of GDP in the same period last year and well above the 0.5% of GDP target level for 2025.
“The central bank does not have sufficient reasons to lower the rate, price growth remains high despite the strong rouble and slowdown in lending,” said Maxim Petronevich from Rosselkhozbank.
“However, there are no reasons to raise the rate either, as the intermediate goal of slowing the lending market has already been achieved, while more time is needed to achieve the ultimate goal of reducing price growth,” he added.
Speaking ahead of the board meeting on March 1, Kirill Tremasov, adviser to governor Elvira Nabiullina, described the current situation as a “breaking point,” saying that board members usually have widely varying views in such moments.
“Therefore, I would not be surprised if at the March meeting we consider both a rate cut and hear voices advocating for a rate increase,” Tremasov said. Some analysts shared this view, highlighting uncertainty.
“Changes in external factors can significantly influence the policy of the central bank in either direction,” Gazprombank’s analysts said. They expect that the rate-cutting cycle may not start until June or July.
(Reporting by Elena Fabrichnaya, writing by Gleb Bryanski; Editing by Toby Chopra)
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