Central Bank of Russia's key rate may rise to 21% in 2024, VTB expecting monetary easing in H2 2025 - VTB chief

SOCHI. Oct 16 (Interfax) - The Central Bank of Russia could raise the key rate to 21% before the end of the year from the current level of 19%, while monetary easing may begin in the second half of 2025, head of VTB Andrei Kostin said.

The CBR raised the key rate twice in 2024, by 200 basis points to 18% in July and by 100 basis points to 19% in September. It holds open the possibility of a rise at its next meeting on October 25.

"I think that the rate will rise this year. I don't know [if it will happen] at this meeting or the next one, but it could reach 21%. In our opinion, it will stay like this until the end of the year. And monetary policy will probably be sufficiently tight in the first half of the year. But we expect nevertheless that beginning in the second half of the year the rate may gradually fall, as will inflation. According to our forecasts, it [inflation] may be around 6% next year. And I think this is a good argument in favor of reducing the rate," Kostin said on the Rossiya-24 television channel.

VTB First Deputy Management Board Chairman Dmitry Pyanov said last week that the Russian authorities could create a regular consultative body for countering price rises in order to help the CBR overcome high inflation. Creating a special body is not an initiative of VTB, but the opinion of one of the bank's top managers, Kostin said. "We don't have any kind of consensus on this; at the moment everyone expresses their own opinion," he said.

"Regarding an increase in the rate, of course, this is the traditional method [and] a mechanism for regulating the money supply, and in turn a monetary tool for combating inflation. So the Central Bank applies it, and this is probably the right decision. But there are non-monetary components. And that's what my first deputy had in mind. Close interaction between the government and the Central Bank is needed. Because aside from the rate, such factors as tariffs on natural monopolies, wage growth and budget expenditures could have an effect. This is indeed what we see," he said. Inflation is not falling as quickly as desired due to these factors, he said.