Central Bank of Russia's current forecast assumes fairly significant further rate reduction

MOSCOW. March 23 (Interfax) - The Central Bank of Russia's current forecast assumes fairly significant further key rate reduction, CBR Deputy Governor Alexei Zabotkin said at a meeting of the State Duma Financial Markets Committee.

The Central Bank of Russia's February forecast is for an average key rate of 13.5%-14.5% in 2026.

The CBR lowered its key rate 50 basis points to 15% per annum on March 20.

"We will assess the feasibility of further rate reduction at our upcoming meetings. Our current forecast assumes a fairly significant further downward trend this year," Zabotkin said.

He said economic activity and aggregate demand were converging increasingly with manufacturing capability according to the latest data. "Manufacturing capability and labor productivity continue to increase. With more restrained demand growth in recent quarters, manufacturing capability, which had surged in 2023-2024, is finally catching up," he said.

This can be seen in the easing of tensions in the labor market and, most importantly, the slowing of inflation, Zabotkin said.

"It is probably too soon to talk about the economy returning to low inflation," he said, adding that inflation expectations were elevated.

The Central Bank continued to cut the rate, mindful of these elevated inflation expectations and given a marked reduction in the scale of overheating demand.