The Bank of Russia has opted to maintain the key rate at 16.0% per annum, according to Governor Elvira Nabiullina. The decision follows a review of inflationary pressures, which have been easing gradually, though lending and consumer activities remain high. Despite some deceleration in inflation, "it is so far impossible to say that the slowdown of inflation has become steady," Nabiullina stated.
Inflation was notably lower in the first quarter of 2024 compared to the last quarter of 2023. By March, price growth had decreased to 4.5% from February's 6.3%, primarily due to one-off factors like declining fruit and vegetable prices. Most measures of underlying inflation also decreased in March, with estimates now closer to 6% annually.
The economic outlook remains robust after a slight deceleration at the end of last year. Consumption growth over January and February exceeded forecasts, and labour market tightness reflects rising demand for labor across regions. The GDP growth forecast for this year has been revised upwards to 2.5–3.5%.
Nabiullina noted that "the expansion of demand still outstrips the capacities to ramp up supply," which remains a significant source of inflationary pressure. If disinflation proceeds too slowly, maintaining or even increasing the key rate may be necessary.
Structural transformation continues within the Russian economy, driven by domestic market focus and shrinking net exports share. High corporate profits are expected to contribute to domestic investment growth.
Monetary conditions have remained largely unchanged since March, with government bond yields rising more significantly in long-term segments and no decline observed in financial market activity.
Retail lending will see tighter macroprudential measures starting July 1st as risk-based add-ons for consumer loans increase from 25% to 40%. Add-ons for car loans will also be introduced for borrowers with high debt service-to-income ratios.
External conditions reflect a rapidly expanding world economy despite signs of slowing down. Sanction pressures continue affecting foreign trade logistics and payments.
Nabiullina concluded by emphasizing that decisions made last year helped weaken persistent inflationary pressures: "We are ready to keep the key rate at high levels as long as needed." The annual average key rate forecast has been revised upwards for both this year and next.