MNI CBR Preview - Dec'25: Easing Pace to Be Maintained
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Executive summary:
- The CBR is expected to continue with monetary policy easing following two months of lower-than-expected inflation readings.
- Governor Elvira Nabiullina has previously advised that further easing is to be approached with caution, and therefore a larger 100bp rate cut is seen only as an outside possibility, particularly given the recent increase in household inflation expectations.
- According to a poll published by Vedomosti, 17 of 23 analysts expect the central bank to lower its key interest rate by 50bps to 16.00%.
At its meeting in October, the CBR lowered the key rate by 50bps to 16.50%. Its discussions included a larger 100bp cut as well as no change. When discussing the size of the key rate cut, most participants agreed that 50bps would address both slowing economic growth as well as receding inflationary pressures since the beginning of the year. At the same time, the more cautious option was seen as acknowledging still-present inflationary risks. Participants were unanimous in their choice of signal: a neutral signal must be maintained. The Bank also repeated guidance that stabilising inflation to target will require a prolonged period of tight monetary policy.
Since then, Russia has recorded two consecutive months of below-estimate headline inflation readings. In November, annual CPI inflation slowed to +6.6% Y/Y from +7.7% Y/Y in October. The CBR noted that seasonally adjusted monthly price growth slowed to 2.2% on an annualised basis – significantly less than the 7.0% in October – with the decline in inflation driven not only by volatile goods and services components, but by falling gasoline and food prices.
