The Central Bank of Russia is expected to keep its key rate unchanged at 16% for the third consecutive meeting.
Minutes of last month’s MPC meeting revealed that meeting participants were of the opinion that, given the current situation, tight monetary conditions in the economy should be maintained for a longer period of time. Only a ‘hold’ option was considered by policymakers, though most agreed that inflation pressures have been easing in recent months, albeit at a less pronounced rate than at the end of 2023. The minutes showed that three main arguments justified the hold decision and similar factors will likely warrant another hold this month: 1) there is no certainty yet about the speed of further disinflation; 2) monetary conditions have not yet fully adjusted to previous key rate increases; 3) the risks from a premature reduction of the key rate can be significant.
Interestingly, the CBR noted that “a consensus emerged that at the March meeting there should be no additional directional signal about changes in the level of the key rate at the coming meetings,” adding that “a signal about a reduction in the key rate may lead to a premature easing of monetary conditions” while “a signal about an increase in the key rate may lead to an additional, excessive tightening of monetary conditions.”
