Monetary Policy Report

The key rate remains unchanged

Inflation forecast
for the year-end 2021

There is space for monetary policy easing. The Bank of Russia will consider the necessity of key rate reduction at its upcoming meetings

is close to 4%

Inflation and BoR key rate, YoY

In September, annual inflation stood at 3.7%. Inflation processes are in line with the baseline scenario. Consumer prices are forecast to grow by 3.9–4.2% over the entire year.

Price movements are impacted by competing factors. On the one hand, inflation is driven by the actual weakening of the ruble; on the other hand, it is influenced by the more moderate revival of domestic demand than in summer.

Given the current monetary policy stance, annual inflation will come in at 3.5–4.0% in 2021 and will stay close to 4% further on. The accommodative monetary policy pursued limits the risks of a substantial deviation of inflation downwards from the target.

Economic recovery
slowed down

GDP growth rate, YoY

The recovery growth of the economy decelerated in autumn, due to both the exhausted effects of pent-up demand and the worsening epidemiological situation.

According to the Bank of Russia’s estimate, GDP will decrease by 4.0–5.0% in 2020, which is slightly less than assumed in July’s forecast (4.5–5.5%). This is predominantly related to a slightly more favourable than expected export performance in Q2-Q3 2020.

The earlier key rate cuts will continue to support the economy both this year and in 2021.

Monetary conditions
have been easing

OFZ yields and the Bank of Russia key rate, %

The earlier decisions on the key rate reduction continue to translate into decreases in loan and deposit rates. These conditions promote the adjustment of saving models, including the redistribution of funds across various financial market instruments.

The reduction in loan rates is also supported by preferencial lending programmes. The lowering of interest rates is combined with the easing of non-price lending conditions.

The yields of federal government bonds with longer maturities decreased amid a certain stabilisation in financial markets.

In the medium term, disinflationary risks still prevail over proinflationary ones, although proinflationary risks slightly rose over the short-term horizon

Disinflationary risks are mostly associated with further coronavirus spread trends in Russia and abroad.

Short-term proinflationary risks are primarily caused by intensified volatility in global markets, including due to geopolitical events. This may impact both exchange rate and inflation expectations.

In addition, uncertainty remains about how the pandemic may affect demand and supply in the economy, and accordingly, price movements. Medium-term inflation trends will also be largely influenced by fiscal policy. 


If the situation develops in line with the baseline forecast, the Bank of Russia will consider the necessity of further key rate reduction at its upcoming meetings. In its key rate decision-making, the Bank of Russia will take into account actual and expected inflation dynamics relative to the target and economic developments over the forecast horizon, as well as risks posed by domestic and external conditions and the reaction of financial markets.