Page 41 - bne IntelliNews Russia OUTLOOK 2025

Moreover, inflation has shown no signs of slowing down since the previous Central Bank meeting in October – by December 16, price growth since the beginning of the year was 9.14%, far exceeding the upper limit of the Central Bank's October forecast (8-8.5% by the end of the year).
Nabiullina explained the decision for several reasons. The most fundamental one is that the CBR took into account November data on lending, which has not yet been published but has clearly been falling, which is disinflationary.
In addition, according to Nabiullina, the market itself began to price in a tightening of monetary conditions: the spread (difference) between the Central Bank rate and the interest rate at which commercial banks issue loans increased from 2-3% to 5-6%.
Still, the December data pointed to continuous acceleration of inflation ahead of the policy board meeting, with annual inflation coming at 9.5% as of December 16 and inflationary expectations of the population remaining high.
The signal in the regulator's press release turned out to be moderately harsh: "The Bank of Russia will assess the advisability of raising the key rate at the next meeting, taking into account the further dynamics of lending and inflation." Nabiullina said that the Central Bank has so far only "taken a pause in raising the rate," and that returning inflation to 4% "will still require a long period of tight monetary conditions."
The CBR's decision to leave rates on hold does not change anything in the long term: high rates will remain for a long time, and Nabiullina is not going to retreat from this. The regulator's current forecast for 2025 sets an average rate of 17-20%. And regardless of how much pressure from state-backed oligarchs the CBR had to withstand in its decision, their attacks will now double, and their goal will be to accelerate the Central Bank's transition to lowering the rate. It will be a titanic struggle, with the next bout due in February 2025.
In the meantime, towards the end of the year, inflationary pressures intensified due to higher food prices ahead of holidays, in addition to the most recent severe weakening of the ruble, and the seasonal hike in both state and household spending.
The decision has called into question CBR Governor Elvia Nabiullina’s legendary independence and her reputation as “the world’s most conservative central banker.” She has come under mounting pressure from oligarchs, and even Putin, to cut rates, which have been crushing
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