The Bank of Russia is expected to potentially lower its key interest rate at its meeting on June 6, marking a possible shift after maintaining a record high rate for eight months. This decision comes amid concerns about economic stagnation and the risk of renewed inflation. Economists suggest this move aims to revitalize the economy by easing credit conditions, but caution against potential inflationary consequences.

The current high key rate has restricted lending to businesses and individuals, hindering investment and spending. Experts believe a rate cut could alleviate this pressure, but the timing and magnitude of the adjustment are crucial.

Despite these potential benefits, the central bank faces the challenge of managing inflation expectations. Businesses and consumers still anticipate price increases, which could counteract the effects of a rate cut. The upcoming indexation of housing and communal services tariffs also poses an inflationary risk. Furthermore, the ruble’s stability, which has helped curb import inflation, could be threatened by a looser monetary policy.

Even if the key rate is lowered, the impact on loan and deposit rates will not be immediate. Banks are expected to act cautiously, with changes first appearing in short-term deposits and interbank loans. A gradual decrease in lending rates for large corporations and select mortgages may follow within a few months. However, mass consumer credit is likely to be the last to respond, potentially not until the end of the year or later, depending on inflation trends and the central bank’s continued policy direction.