The Bank of Russia’s decision to lower the key rate by 1 percentage point, the first decrease since September 2022, has been met with skepticism from economists who believe the move will have little impact on businesses and individuals. The rate is now set at 20% per annum.

Experts suggest that a more substantial reduction, below 15%, would be necessary to provide meaningful relief to enterprises.

Financial manager Vitaly Kalugin described the Central Bank’s decision as insignificant, arguing that the difference between 20% and 21% is negligible. He also suggested that the Central Bank may be attempting to appease public pressure while retaining the flexibility to reverse course if inflation rises again. Kalugin anticipates a potential further rate cut in July but doubts the trend will continue due to persistent inflationary pressures, including potential harvest issues that could drive up food prices. He expects deposit interest rates to decrease, either already having done so or soon decreasing by around 0.5%.

Economist Maxim Maramygin views the rate cut as a signal that the regulator is prepared to lower the rate further, despite believing the situation has not genuinely improved. He suggests this move could encourage businesses to revive postponed development projects.

Credit broker Vadim Shukurov pointed out that the decision to lower the rate is the first since September 2022. He attributes the current decision to a slowdown in inflation and the strengthening of the ruble. Shukurov predicts further rate cuts by the end of 2025, potentially bringing the rate down to 15% per annum. He anticipates a decrease in deposit yields in June, with loan rates following suit later. He believes that reduced interest rates on loans will enable companies to invest in new projects and expand their operations, but investors may seek alternative strategies, such as lending secured by collateral, to achieve higher long-term returns.