UrBC, Yekaterinburg, December 12, 2019. According to NEYVA Bank, the Central Bank of Russia’s next meeting could result in the decision to bring the key rate down to as little as 6.25% p.a.

Now the CBR’s upcoming meeting on December 13, 2019 will be dedicated to the future of the key rate. Financial analysts believe there are at least two possible scenarios: keeping the rate at 6.5% p.a or bringing it down.

According to NEYVA Bank’s representatives, there are quite a few factors that could possibly affect the key rate dynamics, ‘from the world’s leading Central Banks’ policy to the inflation rate in Russia.’

‘If we are to see yet another drop in the key rate (the fifth one this year so far), the figure will stop at 6.25% p.a. As a matter of fact, there could be some good reasons for the rate to decline: figures as low as 6% and even 5.5% have been suggested earlier. The CBR itself, however, came up with a long-term inflation forecast of 4% a year, so a key rate that is about 200 basis points above the inflation rate is seen as normal. This gives us a benchmark of about 6% p.a.,’ Vice Chair of the Supervisory Board at NEYVA Bank Igor Koshmin told UrBC.

Experts point to the fact that a drop in the key rate typically leads to the weakening of the national currency.
‘A smaller difference between the ruble rate and the other currencies’ rates is anything but good news for those investing in the ruble assets. It is therefore unlikely that new investors will arrive following a drop in the key rate,’ the Urals-based banker Koshmin believes.