What will happen to the key rate?

Mikhail Ershov, Principal Director on Financial Studies, Head of the Financial Analysis Department at the Institute for Energy and Finance, commented on the key rate at the Stolypin Club meeting:

“The key rate is likely to be reduced by at least 0.5 percentage points. There is a slowdown in inflation, which should allow the regulator to continue reducing the rate. The expediency of the reduction is already being discussed at the highest level.

At the same time, the regulator broadcasts that there are factors in foreign markets that can increase inflation in our country. This may slow down further rate cuts. However, we emphasize that continued rate cuts are extremely important. Especially in conditions when the budget's capacity to support the economy is limited and foreign capital markets are closed.

Business is increasingly paying attention to the fact that maintaining a high rate for a long period not only slows down economic growth, but also forces a qualitative restructuring of business processes. The business is forced to freeze many already accepted investment projects.

A lower rate will make it easier to achieve the transition to a supply-side economy. The importance of such an economy is increasingly being emphasized at various levels. Hopefully, the reduction in rates will also contribute to the growth of the stock market, since in conditions of high rates, tangible growth in the stock market is difficult.

Note that not only is the indicator of inflation itself important, i.e. the rate of price growth, but the absolute price level is also important. It's rarely talked about. But even if prices have stopped rising, but their level is already high, this in itself is a strong constraint on economic growth and consumption.

How to reduce the absolute price level is already beyond the direct competence of the Central Bank of the Russian Federation. These are issues of industrial policy, producers, cost economics, etc. Therefore, it is necessary to include in the decision all departments that can influence these issues.”