Interest Rate of the Bank of Russia: in Search of a Neutral Level

Tatiana V. Evdokimova – Chief Economist on Russia of Nordea Bank, PhD in Economics (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Grigory A. Zhirnov – Junior Analyst of Nordea Bank (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Since September 2019, the key rate of the Central Bank of Russia (CBR) has been in a range of 6–7%, which is viewed by the regulator as neutral. As the actual rate has entered the neutral range the adequacy of the current estimates has become particularly topical. Most external factors now speak in favor of a lower neutral rate. Internal factors, however, don’t give too many reasons for a similar revision. The authors believe that taken together external and internal factors justify a revision of a lower range bound from 6% to 5,5% by the middle of 2020.

Key words: neutral rate, monetary policy, central bank, country risk premium.