MNI CBR Preview - July 2025: Continued Easing

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Executive summary:

• The CBR is expected to continue with monetary policy easing, with more benign inflation developments, slower economic activity and a strong RUB all justifying further rate cuts.
• Governor Elvira Nabiullina advised last month that further easing was to be approached with caution but concerns over an inflation resurgence have not been realised.
• Among sell-side, views range from a cut of as small as 150bps to as large as 250bps, with the median estimate looking for 200bps.

At the key rate meeting in June, the CBR’s discussion centred on whether the decrease in inflationary pressures was sustainable and fast enough to bring inflation back to the target in 2026. According to most policymakers, there were more grounds to believe that inflation would continue decelerating at the required pace, justifying a 100bp reduction to the key rate – taking it from 20.00% to 19.00%. The Bank said it will maintain monetary conditions as tight as necessary in order to bring inflation back to the target in 2026, and that this means that policy will remain tight for a long period.

Since then, inflation remains on a more benign path – annual inflation eased from 9.88% in May to 9.40% in June, while the most recent weekly data showed prices fell 0.05%, the first instance of deflation this year. Seasonally adjusted monthly price growth amounted to 4.0%, down from around 4.5% the month prior.