MOSCOW, July 22. /TASS/. The Board of Directors of the Bank of Russia is most likely to keep the key interest rate unchanged at 14.25% per annum at its July 24 meeting, according to 18 of the 22 market participants surveyed by TASS. Three respondents said the regulator could either leave the rate unchanged or lower it to 14%, while only one viewed a 25-basis-point cut as the baseline scenario.
Experts noted that the room for further monetary easing has narrowed due to accelerating inflation driven by rising fuel prices, higher inflation expectations, a looser fiscal policy, and money supply dynamics. At the same time, slowing core inflation and signs of an economic slowdown continue to support the case for a rate cut.
At its previous meeting in June, the Bank of Russia lowered the key rate by 25 basis points for the fourth consecutive meeting, bringing it to 14.25% per annum. At the time, the regulator noted some moderation in underlying price growth but emphasized that lending had accelerated again and fiscal policy had become more expansionary than previously expected.
Earlier in July, Deputy Governor of the Bank of Russia Alexey Zabotkin said the regulator could not ignore developments in the fuel market and inflation expectations. At the same time, the central bank expects the situation to normalize and will assess the extent to which higher fuel prices affect household and business inflation expectations. According to data published by the Bank of Russia on July 21, one-year inflation expectations among households rose to 14.7% in July from 12.4%, while perceived inflation increased to 15.1% from 14.2%.
Pause in the easing cycle
The 18 analysts expecting the rate to remain at 14.25% believe the Bank of Russia will pause its easing cycle for the first time since June of last year.
"The impact of the fuel crisis is forcing a pause in the rate-cutting cycle. The regulator is compelled to postpone further easing because of fuel supply shortages and rising production and transportation costs. Pressure on fuel output is more significant and prolonged than during last fall’s crisis. Production and transportation costs continue to rise and are unlikely to decline significantly, pointing to an L-shaped trajectory for fuel prices and only a limited disinflationary effect as the crisis subsides," Chief Economist at BCS World of Investments Ilya Fyodorov said.
According to Fyodorov, the situation is further complicated by a dual pricing structure, with regulated fuel volumes sold at fixed prices while prices charged by independent retailers have doubled, significantly fueling inflation expectations. "We have raised our 2026 inflation forecast from 5% to 6.2%. At the moment, pro-inflationary risks outweigh disinflationary ones," he added.
Mikhail Vasilyev, Chief Analyst at Sovcombank, also expects the key rate to remain at 14.25%. "The case for leaving the rate unchanged is supported by accelerating inflation in June and July, partly due to the difficult situation in the motor fuel market. While seasonally adjusted annualized inflation was around 2% in April-May, we have seen it accelerate to more than 10% in June-July. Rising business price expectations in July and uncertainty surrounding fiscal policy also argue in favor of a pause," Vasilyev said.
"According to statements by the Finance Ministry, the return to a zero primary structural deficit will occur only in 2029, rather than 2026 as previously planned. As a result, stronger fiscal stimulus limits the scope for further monetary easing. We also note that money supply has been growing by about 13% year-on-year in recent months, exceeding the central bank’s 5-10% forecast for this year," he added. Vasilyev also expects the Bank of Russia to adopt a more cautious tone, with its policy guidance likely shifting to neutral.
At the same time, Chief Economist at Gazprombank Pavel Biryukov said June’s acceleration in inflation does not yet justify returning to rate hikes. "According to the central bank’s assessment, about two-thirds of June’s increase in the consumer price index was driven by two volatile categories - vegetables and fuel. The Bank of Russia still does not see broad-based secondary inflation effects: growth in other components of the consumer basket remains moderate, as reflected by core inflation remaining at 4.3% annualized, seasonally adjusted, in June, the same as in May," he said.
Evgeny Zhornist, Head of Fixed Income at Alfa Capital, likewise sees no grounds for raising the rate. "Tighter monetary policy cannot solve the fuel shortage problem, while the economy is showing increasing signs of cooling. This is reflected in a decline in the business climate indicator, slower industrial production, and lower corporate profits and investment activity. Another factor tightening financial conditions has been the increase in OFZ government bond yields following the June meeting," he said.
A rate cut remains possible
The possibility of a 25-basis-point rate cut to 14% appears in the forecasts of four respondents. However, only Yury Kravchenko, Head of Banking and Money Market Analysis at Veles Capital, considers this the baseline scenario. Three other analysts forecast a range of 14-14.25%.
"Our baseline forecast for the July 24 meeting is a 25-basis-point rate cut to 14% per annum. However, we believe this decision will be possible only if the latest inflation expectations data do not show a sharp deterioration. Even if the rate is lowered, we expect the central bank to tighten its policy signal and prepare markets for a pause in the easing cycle this fall. The reason is that room for further rate cuts remains constrained by persistent pro-inflationary risks, primarily fuel prices, tariffs, and fiscal policy," Kravchenko said.
According to Olga Belenkaya, Head of Macroeconomic Analysis at Finam Financial Group, the arguments in favor of a rate cut are primarily linked to weakening economic activity. "Parts of the economy are already in recession. The Bank of Russia’s July business survey showed the business climate indicator falling into negative territory, signaling a contraction in economic activity. Against the backdrop of GDP growth slowing to 0.3% year-on-year in May and business climate indicators weakening in June-July, the risk of the economy slipping into recession cannot be ruled out, and excessively tight monetary policy could aggravate the situation," she said.
The outlook matters more than the decision
At its July policy meeting, the Bank of Russia will also present an updated medium-term macroeconomic forecast. Several respondents said the revised outlook would matter more to markets than the rate decision itself.
"The more important outcome of the July meeting will not be the size of the rate move itself but the revision of the central bank’s own key rate forecast. The regulator currently projects an average key rate of 8-10% in 2027, but we believe this forecast will be revised upward, possibly to 10-13%," Chief Economist for Russia at Euler Elena Akhmedova said.
Belenkaya also expects the projected rate path to be revised upward. "In effect, the Bank of Russia already signaled at its June meeting that the medium-term key rate forecast would most likely be revised upward. The main factor is a more expansionary fiscal policy for 2026-2028 than previously expected. This has already tightened financial conditions through higher OFZ yields and has led analysts to significantly raise their consensus expectations for the future path of the key rate," she noted.
Analysts remain divided on the future trajectory of rates. "We believe the Bank of Russia will leave the key rate unchanged in July and September until the impact of the primary and secondary effects of the fuel shock becomes clearer," Ilya Fedorov from BCS World of Investments noted.
Igor Rapokhin, Senior Rates and Fixed Income Strategist at SberCIB Investment Research, expects the regulator to resume rate cuts closer to the end of the year. "We believe inflation risks will become less acute in the fourth quarter of 2026, allowing the central bank to return to 25-basis-point cuts in October-December. Our forecast for the key rate at year-end is 13.75%," he said.
Mikhail Vasilyev from Sovcombank expects a longer pause. "In our baseline scenario, we believe the Bank of Russia will keep the key rate at 14.25% until December. In December, we expect a 25-basis-point cut to 14%," he said.
Meanwhile, Alexander Golovtsov, Head of Research at PSB Asset Management, expects the rate to decline to 13.75% by the end of December but notes that the risks have shifted toward a more conservative scenario. "Our baseline scenario still assumes a cut to 13.75% by December, implying pauses at two or three of the remaining meetings this year. The average rate for the year would be about 14.5%. However, over the past month, risks have shifted toward a more conservative scenario in which the rate remains unchanged through the end of the year," he concluded.
Market forecasts
- BCS World of Investments - 14.25%
- First Asset Management - 14.25%
- Renaissance Capital - 14.25%
- Sovcombank - 14.25%
- Tsifra Broker - 14.25%
- SberCIB Investment Research - 14.25%
- Region Investment Company - 14.25%
- Expert RA - 14.25%
- Alfa Money - 14.25%
- Gazprombank - 14.25%
- Russian Standard Bank - 14.25%
- Finam - 14.25%
- ACRA - 14.25%
- Alfa Capital - 14.25%
- Alfa Forex - 14-14.25%
- DOM.RF Bank - 14.25%
- Veles Capital - 14%
- Freedom Global - 14.25%
- NRA - 14.25%
- OTP Bank - 14-14.25%
- Euler - 14-14.25%
- PSB Asset Management - 14.25%.