Bank of Russia Expected to Raise Key Interest Rate

The EDB expects that the Bank of Russia will adhere to the "pro-inflationary scenario" in its decisions, which indicates the possibility of further increases in the key rate and anticipates the key rate to increase by another 2 percentage points in December to 23%.

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At its final meeting of the year on December 20, the Bank of Russia is anticipated to increase the key interest rate from 21% to 23% per annum.

This move comes in response to the high inertia of inflationary processes and the expected rise in inflation due to increasing budget expenditures, The Caspian Post reports, citing Russian media.

According to the macroeconomic forecast of the Eurasian Development Bank (EDB) for 2025-2027, in the absence of new shocks, a cycle of rate cuts may be possible in the second half of 2025.

According to the report, the high inertia of inflationary processes and the possible increase in inflation against the backdrop of growing budget expenditures require a tighter monetary policy. The EDB expects that the Bank of Russia will adhere to the "pro-inflationary scenario" in its decisions, which indicates the possibility of further increases in the key rate and anticipates the key rate to increase by another 2 percentage points in December to 23%.

In the absence of new shocks, the EDB expects the interest rate reduction cycle to begin in the second half of 2025 at the earliest. Under these conditions, the EDB forecasts inflation to slow to 6.5% in 2025. Its updated inflation estimate reaches 8.5% by the end of 2024.