The Central Bank of Russia is reportedly contemplating a reduction in the key interest rate, currently at a record high of 21% since October 2024. This potential shift comes as the high rate’s impact on the federal budget and various economic sectors is being scrutinized.

While Minister of Finance Anton Siluanov supports maintaining a high rate to combat inflation, Minister of Economy Maxim Reshetnikov and other government insiders believe a lower rate is necessary. The Central Bank’s upcoming meeting on June 6 could signal a change in direction after holding the rate steady for four consecutive meetings.

Experts suggest that the impact of a rate reduction on businesses and citizens may be minimal. Financial advisor Alexey Rodin notes the possibility of a rate decrease to 20-20.5%, but acknowledges that inflation, while slowing, remains above the Central Bank’s target, exceeding 10% annually. High inflation expectations and rising service costs further complicate the decision.

Rodin also points out a proposed law requiring manufacturers to comply with state standards, which could drive up prices and counteract the benefits of a lower rate. A rate cut could stimulate lending and make bank deposits less attractive, potentially fueling inflation. The Central Bank is seen as likely to maintain the current rate and adopt a more cautious approach.

Professor Yuri Lyandau believes that even a slight rate decrease would have a negligible impact. While banks might marginally lower deposit and loan rates, a significant reduction of at least 10 percentage points would be necessary to noticeably improve loan accessibility. However, the Central Bank fears that such a move would lead to higher inflation, for which they purportedly lack alternative solutions.

The decision to maintain the rate carries the risk of recession, while lowering it could jeopardize inflation control. The regulator’s choice remains to be seen.