Some participants in rate discussion said reduction possible before H2 2024 - Central Bank of Russia

MOSCOW. Feb 28 (Interfax) - Most participants in February's discussion of the Central Bank of Russia's key rate decision said the baseline scenario was that conditions for monetary easing would start to emerge in the second half of 2024, but some held open the possibility of slightly earlier rate reduction, according to a summary of the discussion.

The Central Bank considered two possible rate decisions at its February meeting: holding the rate at 16% per annum, which was the final decision; and hiking it 100 basis points to 17%.

The Central Bank's press release that accompanied the rate decision retained the phrase about the need for monetary conditions to remain tight for a lengthy period in order to bring inflation back to target. The discussion participants were of the opinion that this is an important factor for the desired direction of monetary policy. "At the same time, all participants agreed that it is important to avoid interpreting this signal as a direct indication that the key rate itself will remain unchanged for a lengthy period. If there is a sustained decline in inflation and inflation expectations, a gradual drop in the key rate will correspond to the same degree of monetary tightness, that is the same level of interest rates," the Central Bank said in its summary.

The Central Bank's assessment of the economic situation was one argument for holding the rate. "There is still a considerable positive output gap in the economy, but this seems to have peaked in the middle of the fourth quarter of 2023. The gap has begun to close gradually in light of current data on inflation dynamics and domestic demand. In addition, higher GDP growth in 2023 amid weakening inflationary pressure may point to a higher degree of potential for the Russian economy," it said.