Russia's budget allows monetary easing, but other factors also key, central bank official says

Russia's newly announced three-year budget plan is consistent with the central bank's July forecast and will enable further monetary policy easing, according to Deputy Central Bank Governor Alexei Zabotkin. He stated in a speech to the State Duma that the budget's parameters, which include covering additional expenditures with tax revenues, will help to moderate the impact on demand and interest rates. This fiscal approach, Zabotkin indicated, supports the central bank's ability to continue easing monetary policy.

The Bank of Russia maintained its key interest rate at 14% in September, following a series of ten consecutive rate reductions. The bank is scheduled to review its monetary policy again on October 23.

Zabotkin also noted that the central bank's baseline forecast for 2027 anticipates inflation stabilizing at a low level with an average annual rate between 10.5% and 12.5%. He added that the forecast will be updated after the October meeting, with a continued return to a neutral rate expected in 2028, reaching it by 2029 when the budget is projected to achieve a zero structural primary deficit. The deputy governor emphasized that the government's planned reduction of the structural primary deficit is a significant, though not the sole, condition for potential monetary policy easing and rate cuts in 2027.