Bank of Russia keeps the key rate at 21.00% p.a.
Central bank: cbr | Type: statement | Date: 2024-12-20

On 20 December 2024, the Bank of Russia Board of Directors decided to keep
the key rate
at 21.00% per annum. Monetary conditions tightened more significantly than envisaged by the October key rate decision. This is the result of the effects of factors autonomous from monetary policy. According to the Bank of Russia, given the notable increase in interest rates for borrowers and the cooling of credit activity, the achieved tightness of monetary conditions creates the necessary prerequisites for resuming disinflation processes and returning inflation to the target, despite the elevated current price growth and high domestic demand. The Bank of Russia will assess the need for a key rate increase at its upcoming meeting taking into account further lending and inflation dynamics. According to the Bank of Russia’s forecast, given the monetary policy stance, annual inflation will decline to 4.0% in 2026 and stay at the target further on.
In October—November, the
current seasonally adjusted
price growth
averaged 11.1% in annualised terms after 11.3% in the previous quarter. Although volatile components make a considerable contribution to price changes, underlying inflationary pressures increased. Core inflation was up to an average of 10.9% in October—November after 7.6% in the previous quarter (seasonally adjusted annualised rate). This is associated with strong domestic demand recorded in recent quarters. In December, weekly data show that elevated inflationary pressures persist, which is also caused by the depreciation of the ruble. According to estimates as of 16 December, annual inflation went up to 9.5%.
Inflation expectations continue to rise, increasing the inertia of underlying inflation. Household inflation expectations and business price expectations increased in December. Analysts raised their inflation expectations for
2025–2026.
Current price growth will remain elevated for some time due to the inertia caused by the accumulated effects of fiscal stimuli, high credit activity of previous months, and the pass-through of the ruble weakening to prices. However, the Bank of Russia estimates that inflationary pressures will begin to decline in the coming months under the impact of tight monetary conditions and the cooling of lending activity.
According to high-frequency data, in October—November,
the Russian economy
grew at a rate close to the 2024 Q3 figures. High domestic demand is still the main driver of growing economic activity. The upward deviation of the Russian economy from a balanced growth path is still significant. This is also evidenced by high current inflationary pressures.
The labour market remains tight. Unemployment once again dropped to a new historical low. Rising wages continue to outpace growth in labour productivity. Concurrently, demand for labour force in certain industries has been decreasing, and there has been a reallocation of employees across industries. This may indicate a slight reduction in the labour shortage. This trend is also proved by the decreasing number of vacancies.
Monetary conditions
tightened substantially (both price and non-price ones). This was due to both the effects of monetary tightening that had already been implemented since mid-2024 and a number of autonomous factors (tighter macroprudential policy, planned normalisation of banking regulation, tighter requirements of banks for borrowers).
In October, interest rates went up in various segments of the financial market. Yet, due to the impact of autonomous factors, the rise in credit and deposit rates was much greater than it should have been based on the October key rate hike.
Growth in interest rates supports a high propensity of economic agents to save. In addition, the cooling of credit activity has already encompassed all segments of the credit market. In November, growth in retail lending nearly stopped. For the first time since the beginning of 2024, corporate lending growth decelerated significantly. The current intentions of banks to expand lending, taking into consideration, among other things, the current demand from borrowers, create the conditions for a notable cooling of lending activity in 2025. According to the Bank of Russia, given the monetary policy stance and the effects of autonomous factors, as of the end of 2025, total lending growth may be close to the lower bound of the October forecast range of
Over the medium-term horizon, the
balance of inflation risks
is still significantly tilted to the upside, although certain disinflationary risks have increased. The key proinflationary risks are associated with persistently high inflation expectations and the upward deviation of the Russian economy from a balanced growth path, as well as with a deterioration in the terms of foreign trade. Disinflationary risks involve a faster slowdown in lending growth and domestic demand under the impact of tightening of monetary conditions.
The Bank of Russia takes into account the announced parameters of fiscal policy. Its normalisation in 2025 will have a disinflationary effect. Changes in the fiscal policy parameters may require an adjustment in monetary policy pursued.
On 28 December 2024
, the Bank of Russia releases the Summary of the Key Rate Discussion.
The Bank of Russia Board of Directors will hold its next key rate meeting on
14 February 2025
. The press release on the Bank of Russia Board decision and the medium-term forecast are to be published at 13.30 Moscow time.
Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting on 20 December 2024
20.12.2024 13.30.00