\u201cFiscal policy over the three-year horizon will be more accommodative than previously expected. This may require a higher key rate path than assumed in the April baseline scenario,\u201d the Central Bank said.<\/p>\n
Specifically, policymakers said that persistent budget deficits could lock the country into a higher-for-longer interest rate environment.<\/p>\n
Russia has been grappling with weaker oil and gas revenues and rising government spending, largely linked to its wartime economy. The growing deficit has fueled concerns about the sustainability of state finances after the government missed its budget targets by a wide margin last year.<\/p>\n
\t\tnews \t\t\t\tAntitrust Service Investigating Moscow Gas Stations for Possible Price Gouging Central Bank Governor\u00a0Elvira Nabiullina said<\/a> at a press conference that higher gasoline prices were \u201cone of the main factors\u201d that influenced the regulator\u2019s decision to cut the key interest rate by a modest 25 basis points.<\/p>\n \u201cThe recent spike in fuel prices will impact June inflation. The government is taking the necessary measures, but it may take time for supplies to recover,\u201d she said.<\/p>\n The average price of gasoline in Russia has\u00a0climbed<\/a>\u00a06.6% since the start of the year, with a single-week jump pushing national averages to 69.11 rubles per liter ($3.56 per gallon) as of June 15.<\/p>\n Nabiullina, who on Friday appeared in public for the first time in two weeks, also sought to dispel rumors about her health and why she had missed the annual St. Petersburg Economic Forum in early June.<\/p>\n \u201cI had a cold and lost my voice for a while. All I can say is that I am thankful for everyone who was genuinely concerned about my health,\u201d she said.<\/p>\n The Financial Times, citing anonymous sources, reported<\/a> earlier that Nabiullina had fallen ill with a serious respiratory infection.<\/p>\n Sofia Donets, chief economist at T-Investments,\u00a0said<\/a>\u00a0Friday\u2019s rate cut was a sign that\u00a0\u201cconservatism has hardened\u201d among Central Bank officials and that\u00a0\u201croom for maneuver has narrowed.\u201d<\/p>\n \u201cIf this pace keeps up until the end of the year, the key rate will stay above 13%,\u201d Donets said.<\/p>\n Investment banker Yevgeny Kogan echoed<\/a> that sentiment, noting that the Central Bank\u2019s warning that an expanding budget deficit will demand tighter monetary policy means the key rate is set to remain relatively high.<\/p>\n \u201cI think this means we\u2019ll be living with double-digit rates through next year as well, and we can pretty much forget about the Central Bank\u2019s 8-10% forecast for 2027,\u201d Kogan said.<\/p>\n Russian\u00a0stocks fell<\/a>\u00a0after the rate-cut announcement.\u00a0The ruble-denominated MOEX benchmark slid more than 1.6% in afternoon trading.<\/p>\n \t\topinion \t\t\t\tRussia\u2019s Fuel Shortages Are Manageable. But the Kremlin\u2019s Options Are Shrinking. Russia\u2019s economy\u00a0contracted<\/a>\u00a0by 0.2% in annualized terms between January and March, according to the state statistics agency Rosstat.\u00a0Policymakers now expect GDP to grow by just 0.4% this year, a significant decrease from their previous estimate of 1.3%.<\/p>\n This month, President Vladimir Putin\u00a0acknowledged<\/a>\u00a0the slowdown but placed the responsibility for a turnaround squarely on state officials. <\/p>\n \u201cYes, economic growth is currently subdued. I want to remind the government of the target they\u2019ve been set: we need to return to a path of sustainable domestic economic growth starting as early as next year,\u201d\u00a0Putin said at the St. Petersburg International Economic Forum.<\/p>\n At the same time, Russia\u2019s Finance Ministry has said<\/a> it does not consider the country\u2019s widening budget deficit a crisis, despite the shortfall surpassing 6 trillion rubles ($83.5 billion) in the first five months of the year.<\/p>\n The Central Bank will hold its next key\u00a0rate meeting on July 24.<\/p>\n A Message from The Moscow Times:<\/p>\n Dear readers,<\/p>\n We are facing unprecedented challenges. Russia’s Prosecutor General’s Office has designated The Moscow Times as an “undesirable” organization, criminalizing our work and putting our staff at risk of prosecution. This follows our earlier unjust labeling as a “foreign agent.”<\/p>\n These actions are direct attempts to silence independent journalism in Russia. The authorities claim our work “discredits the decisions of the Russian leadership.” We see things differently: we strive to provide accurate, unbiased reporting on Russia.<\/p>\n We, the journalists of The Moscow Times, refuse to be silenced. But to continue our work, we need your help<\/a>.<\/p>\n Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just $2. It’s quick to set up, and every contribution makes a significant impact.<\/p>\n By supporting The Moscow Times, you’re defending open, independent journalism in the face of repression. Thank you for standing with us.<\/p>\n \n\t\t\t\tContinue\n\t\t\t<\/p>\n \t\t\t\t Not ready to support today? \u00d7<\/p>\n \t\tRemind me next month<\/p>\n \n\t\t\tThank you! Your reminder is set.\n\t\t<\/p>\n
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