RSPP head expects CBR to cut rate in "small steps" of 50 bp at least until April to reach 13% by year's end

BRASILIA. Feb 5 (Interfax) - The need to assess how the value-added tax hike at the start of 2026 and a number of other factors have impacted inflation will probably lead the Central Bank of Russia (CBR) to cautiously approach interest rate cuts and move in "small steps" until April, the head of the Russian Union of Industrialists and Entrepreneurs (RSPP), Alexander Shokhin said.

"Proceeding from the optimal [scenario for rate cuts to the end of the year] - to come down from 16% to 13% - you essentially have to lower by 0.5 percentage points, by 50 basis points at every meeting. This would be the right thing to do. Firstly, probably no one is expecting sharp drops, because the impact of tax increases is not completely clear yet. Secondly, of course, we expect that geopolitics might influence this somehow. Therefore now, until April, I think the Central Bank will move in small steps. But it is my belief that these small steps should lead to the reduction of the rate by 50 basis points," Shokhin told reporters, commenting on the prospects of a rate cut at the CBR's February board meeting.

Factors that could affect the decision on the key rate, besides the VAT hike and geopolitics, include the increase of utility rates and the vehicle scrapping fee, as well as the strengthening of the ruble, he said.

Rather than using "strict formulas," the CBR and the government should use their "many, let's say, methods of making decisions here that are more art and a kind of feeling, including political, than science," Shokhin said.

He said the reference point of 12-13% for the rate has been mentioned, including at the president's latest meetings with the government. Shokhin said earlier that this rate range is sensitive for businesses in terms of their willingness to actively resume investment.