Zabotkin projects key rate at 10.5 to 12.5 percent for 2027
Bank of Russia Deputy Governor Alexey Zabotkin presented the draft Monetary Policy Guidelines for 2027–2029 on August 31. The baseline forecast projects the key rate at 13.7–14 percent in late 2026 and 10.5–12.5 percent in 2027 to return inflation to 4 percent.
Baseline path to four percent
The baseline scenario assumes returning inflation to the 4 percent target in 2027 will require keeping the key rate at an average of 13.7–14 percent for the remainder of 2026 and 10.5–12.5 percent in 2027.
The policy rate is projected to return to its neutral range of 7.5–8.5 percent only in 2029.
Deputy Governor Alexey Zabotkin announced a 0.5 percentage point downward revision to the 2026 GDP growth forecast, now projected at 0–1 percent, before recovering to 1.5–2.5 percent annually in 2027–2029.
Supply disruptions in oil refining and logistics accelerated price growth since June 2026, while the federal budget’s structural primary deficit is expected to decline gradually from 2 percent of GDP in 2026 to zero by 2029.
Three alternatives and a fiscal shield
The guidelines outline three alternative paths alongside the baseline.
In a proinflationary scenario with persistent fiscal stimulus and maintenance bottlenecks, the key rate must rise 2.5 percentage points above baseline in 2027 and 3 percentage points in 2028.
Conversely, a disinflationary scenario models faster productivity and artificial intelligence adoption.
Zabotkin also reaffirmed the floating exchange rate and the fiscal rule as vital stabilizers against crude price volatility.
High rates cannot fix structural deficits
The prolonged timeline for policy normalization highlights severe domestic structural constraints facing the economy.
Heavy reliance on monetary tightening to counter supply bottlenecks and fiscal expansion risks choking private investment.
Price stability will remain elusive unless fiscal spending consolidates much faster.