On 11 September the CBR held its key rate at 14.00%, the level it had cut to in July. The last paragraph of the press release says that if the government's forthcoming budget projections imply a higher structural primary deficit, monetary policy tighter than the baseline may be required. That paragraph is being read as the moment the central bank priced the budget. It is not new. It is July's paragraph with one word removed.
The paragraph and its missing word
“The Bank of Russia's July baseline scenario assumes a gradual reduction of the structural primary budget deficit to zero in 2029. The parameters of budget policy, including the path of return to a zero structural balance, will be further clarified in the October forecast after the Government submits new medium-term budget projections to the State Duma. If they assume a higher structural primary budget deficit, monetary policy tighter than in the baseline scenario may be required.”
The same three sentences close the release of 24 July. We compared the two word by word. The only difference is at the very end: in July the sentence read “tighter than in the current baseline scenario”. In September the word “current” is gone. Nothing else in the paragraph differs by a single character.
April said it too, in other words
On 24 April, cutting the rate by 50 basis points to 14.50%, the CBR wrote:
“The Bank of Russia proceeds from the announced parameters of budget policy. They assume that over the medium term budget policy will contribute to slowing inflation. In the case of higher expenditure accompanied by growth of the structural budget deficit, monetary policy tighter than in the baseline scenario will be required.”
Different wording, same conditional — and in April it was stated as a certainty (“will be required”) rather than a possibility. The link between a bigger deficit and higher borrowing costs has been standing text in these releases for at least three meetings.
What is actually new
The pause. In July the rate was cut by 25 basis points, to 14.00%. In September it was not cut at all. The Governor's statement names the budget among the reasons:
“In addition, an important premise for monetary policy is the budget parameters. We expect them to be clarified by the end of September. All of this became the basis for pausing the reduction of the key rate at today's meeting.”
The inflation estimate. In April the CBR put sustained price growth “in the 4–5% range in annualised terms”; in July, the same 4–5%. In September the release says it “accelerated to 5–6% in annualised terms, primarily because of the effect of the temporary reduction of production capacity in certain industries”. That is the number that changed between the two meetings, not the budget sentence.
The release also gives the CBR's own reading of annual inflation as of 7 September: 6.3%. Our inflation indicator, which reads Rosstat's series for August, moved to 6.3% year on year in today's data update. The two are different measurements on different dates and we do not treat them as one, but they are not far apart.
Where else the budget appears
Three more times in the same statement. Among the two things the CBR says it will watch in the coming months: “second, what the final budget projections will be, which are expected to become known this month.” Among the pro-inflationary risks: demand may stay elevated “as a result of a more substantial fiscal stimulus and an acceleration of lending”. And attached directly to the money supply:
“Together with elevated budget spending, this led to the accumulated growth of the money supply since the start of the year exceeding the trajectory that was characteristic of the period of low inflation in 2016–2019.”
What 14% costs the borrower
The rate is the price the budget pays for new debt. At the auction of 9 September, reported by Minfin's own channel, the ministry placed two issues: OFZ 26218, maturing 17 September 2031, at a weighted average price of 77.9203% of par — a yield of 15.45%; and OFZ 26230, maturing 16 March 2039, at 57.8526% of par — a yield of 15.97%. Both are above the key rate. The gap between what those bonds add to the debt at par and what they raised in cash was the subject of our piece on 10 September.
Why this is our question
The budget deficit scores 65 out of 100, with the rolling twelve-month federal deficit at 3.3% of GDP through July. Money supply scores 86 out of 100 at 12.9% year on year. Our indicator measures that growth; the CBR's statement gives one reason for it and names budget spending first.
The other budget development that week came from the government: the rules for judging oil and gas tax breaks were rewritten on 11 September, also ahead of the projections nobody has seen.
What this changes in our model
Nothing. The key rate is not one of our eight components. A held rate is not a fiscal event; it is a statement about the price of the next rouble borrowed.
The strength index stands at 46.8 out of 100, in the stress zone. Annual inflation was the only indicator to move in today's update, from 6.0% to 6.3%, taking its score from 96 to 95.
What we do not know
The press conference is not published. For 11 September cbr.ru carries the press release and the Governor's statement, in Russian and English. The question-and-answer transcript that usually follows had not appeared when we checked, and the neighbouring page ids return 404. Two figures from that press conference are circulating: a budget deficit path of 2%, 1% and 0.5% of GDP over the next three years, and a 2 percentage point upward shift in the 2027 key-rate path. Both come from news agency accounts of what was said, not from any CBR document, and neither number appears in the release or the statement. We do not carry them as CBR data.
The projections themselves are not yet public. The whole conditional turns on budget figures that have not been submitted. Minfin has said the government will consider the draft in the last ten days of September; the Governor says “by the end of September”.
What the CBR concluded internally is not yet public. The summary of the key rate discussion, which normally shows the spread of views on the board, is due on 23 September. The next meeting and the next forecast are on 23 October, by which time the budget is supposed to be in the Duma.