MNI CBRT Review - June 2025: Stage Set for a July Cut

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Executive summary:

• The CBRT kept the one-week repo rate unchanged at 46.00%, as was widely expected.
• There was a slight moderation in hawkish language in the policy statement, which sets the stage for a rate cut in July.
• Among sell-side, analysts expect the central bank to restart its cutting cycle next month, with the main policy rate expected to end the year in the mid-30s.

No change to the repo rate had been expected this month given increased funding through the key rate – i.e. at 46.00% – and less reliance on the overnight lending facility – where the associated rate is 49.00% – effectively meant that the central bank had already eased liquidity conditions by 300bps without actually adjusting the main policy rate. Indeed, the weighted average cost of funding has fallen from around 49% to closer to 46%, meaning policymakers were in no rush to restart its rate-cutting cycle.

In April, the CBRT’s policy statement noted that “Monetary policy stance will be tightened in case a significant and persistent deterioration in inflation is foreseen,” whereas this month’s edition states that “All monetary policy tools will be used effectively in case a significant and persistent deterioration in inflation is foreseen” – a subtle change in language which is consistent with a July rate cut. Officials have previously stressed that monetary policy can be restrictive even if rate cuts are being delivered, and this rhetoric is likely to be repeated when easing eventually resumes given that headline inflation is currently running around 10ppts below the main policy rate.