Third reduction: Bank of Russia lowers key rate to 17%

The Central Bank has reduced the key rate by 1%, to 17%. This is the third reduction in a row after the regulator's tough policy lasting more than two and a half years. Inflation in Russia, although slowly, continues to slow down and, according to updated data from the Ministry of Economic Development, amounted to 8.1% by September 8. Obviously, this factor was taken into account by the regulator.

As well as the need to accelerate the stalled domestic economy, the growth rate of which has noticeably slowed by autumn. How the decision of the Bank of Russia will affect the economy as a whole and the pockets of citizens, MK found out from experts.

Natalia Milchakova, leading analyst at Freedom Finance Global:

"A reduction in the key rate will revive lending and make financial resources for businesses slightly less expensive and more accessible. However, for a radical change in the economic trend, that is, for its return to high growth rates, as in 2024, it is necessary for the key rate to be even lower - about 14-15% per annum. However, the lower the key rate, the lower the interest rates of banks, the higher the volume of lending, which can increase the money supply and slow down the decline in inflation. This situation has already occurred in the United States and the eurozone, where the reduction in central bank interest rates began earlier than in Russia.

The more the key rate decreases, the more interest rates on loans and deposits will fall. We expect that mortgage loans after today's decision of the Central Bank of the Russian Federation may become cheaper on average to 22-23% per annum, interest rates on deposits may fall to 13-15% per annum.

The impact of the key rate reduction on the lives of ordinary Russians will be mixed – mortgages and consumer loans will become cheaper, but not too much, and interest rates on deposits will continue to fall, but for now, for a month or two, they will remain double-digit, and depositors will still be able to earn good money. Lower interest rates on loans can at the same time contribute to the increased availability of financial resources for businesses and the creation of new jobs. We expect that by the end of the week the dollar will fluctuate within 83-85 rubles, the euro – 96-99 rubles, the yuan – 11.4-11.8 rubles."

Vasily Girya, General Director of GIS Mining:

"The decision of the Central Bank of the Russian Federation is logically based on the reduction of inflation risks according to domestic statistics, coupled with the need to support lending and business activity. The geopolitical background is currently in the shadows and does not dictate urgent tightening, so the Bank of Russia can move along the trajectory of controlled easing.

The regulator's logic is based on several parameters: current inflation, inflation expectations of households and businesses, currency market balance and external conditions, import and export dynamics, and financial stability. The Central Bank of the Russian Federation will clearly stipulate the conditionality of further steps: the more steadily inflation slows down and the weaker the secondary effects (fuel, logistics, imported components), the higher the chance of additional downward steps in the fall. If pro-inflationary factors intensify, the rate reduction rate will be slowed.

For the ruble, the effect is mixed. The very fact of the rate cut puts pressure on the ruble, but this effect is not immediate and has already been largely taken into account by banks and large investors. In the foreseeable future, the base corridor for the dollar remains at 82–86 rubles, for the euro within the range of 94–98 rubles, for the yuan 11.45–11.7 rubles. Further dynamics will be determined by the balance of flows: the activity of importers, sales of proceeds by exporters and the external background with geopolitics in the foreground.

Banking products will begin to transform at different speeds. The reaction is usually faster for deposits: the first rate cuts on new deposits are possible within 1–2 weeks after the decision. For loans, the effect is spread out: for short-term and revolving loans — within 3–6 weeks, for new consumer loans and car loans — by an average of 0.5–1% within 1–2 months, for mortgages — selectively and gradually, since much depends on subsidies and bank programs."

Natalia Pyryeva, leading analyst at Tsifra Broker:

"The inflation trajectory is below the Bank of Russia's forecasts, and the economy is also slowing down at a faster pace than forecast. All this allowed the regulator to continue the track of reducing the key rate, especially given the growing risks to the economy. The seasonal factor of falling prices for fruit and vegetable products, although more pronounced than a year earlier, does not give confidence that the autumn dynamics of the decline in inflation will be sustainable. In particular, an acceleration in the rate of price growth for most categories of the non-food segment, dependent on the exchange rate, is already being observed. In addition, there is a significant increase in prices for unregulated services due to the continuing growth in household incomes in the context of historically low unemployment. Thus, the balance is still shifted towards pro-inflationary risks - from the budget, the labor market, increased inflation expectations, and the dynamics of the ruble exchange rate.

The trend towards a weakening ruble is gradually intensifying. Weak conditions on the oil market are leading to a contraction in export revenues for Russian oil and gas companies, while the track towards a reduction in the key rate and subsequent reduction in deposit rates is leading to a decrease in the attractiveness of ruble assets, which in total is leading to a decrease in the supply of foreign currency on the market. However, we still do not expect a sharp weakening of the ruble in the short term.

Banks are already targeting a reduction in the key rate to 14-15% by the end of the year and are lowering deposit rates, while interest rates on loans to individuals remain high. We believe that a similar trend will continue as the rate decreases — deposit rates will decrease faster than loan rates. The main reason for this movement is that banks are compensating for the period of expensive funding in this way.

The beginning of the monetary policy easing for Russians will not mean a quick transition to a better life. In this case, it is appropriate to say that the night is always darkest before the dawn, so we believe that in the long term until the end of 2025, the burden of high rates will continue to have a negative impact on both Russians and businesses. The real effect of the monetary policy easing will be seen in 2026, most likely in the second half of it."