- Decision
- Lower
- Rate change
- 200 bps
- key rate
- 18%
The Bank of Russia cut its key rate by 200 bp to 18.00 % per annum, citing a faster-than-expected decline in headline and core inflation and a moderation in domestic demand as the economy moves toward a more balanced growth path, while warning that inflation expectations remain high. After holding at 21 % in April and trimming the rate by 100 bp to 20 % in June, the central bank now foresees keeping policy “tight for a long period”, projecting an average key rate of 18.8–19.6 % in 2025 and 12.0–13.0 % in 2026. Seasonally adjusted price growth slowed to 4.8 % annualised in Q2 from 8.2 % in Q1, core inflation eased to 4.5 %, and headline inflation fell to 9.2 % as of 21 July, though a temporary CPI uptick is expected from higher utility tariffs; the bank still sees inflation at 6–7 % in 2025 before converging to the 4 % target in 2026. High-frequency indicators point to cooling domestic demand, a gradual easing of labour-market tightness and subdued credit growth, with unsecured consumer lending contracting even as deposit rates and nominal market rates edge lower but remain sharply positive in real terms. A stronger ruble is containing non-food prices, yet the balance of risks stays skewed towards higher inflation amid persistent expectations, potential deterioration in external trade and oil prices, and ongoing geopolitical uncertainty. The Bank reaffirmed its commitment to maintain sufficiently tight conditions and said further rate moves will depend on the durability of disinflation and the path of inflation expectations.
Rate evolution
From June 2025 to July 2026, the Bank of Russia lowered the key rate by 600 basis points to 14.00%, with 300 basis points of easing delivered in June and July 2025, smaller cuts thereafter as disinflation became uneven, and successive 25 basis point reductions on 19 June and 24 July 2026. Early decisions cited falling underlying inflation, slowing domestic demand and the economy’s return to a balanced growth path, although monetary conditions remained tight, the labour market stayed tight and inflation expectations remained elevated. Through late 2025, cuts slowed as underlying price growth stayed above 4%, lending accelerated, and one-off moves in tariffs, fuel, fruit and vegetables, value added tax and administered prices clouded the signal, while the Bank’s risk framing hardened from slightly reduced but still prevailing proinflationary risks to increased proinflationary risks in October.
The June and July 2026 cuts reflected moderate economic growth after a temporary decline at the beginning of the year, slower current price growth in April and May, and average price growth of 5.0% in annualised terms in the second quarter, but the Bank noted that underlying inflation remained at 4–5%, inflation expectations had increased and wage growth continued to outpace productivity. On 24 July, it said a smoother key rate decrease was required because of the direct and second-round effects of temporary production capacity shutdowns in certain sectors and more expansionary fiscal policy over the three-year horizon than projected in April. On 11 September, the Bank held the key rate at 14.00% as current price pressures increased significantly, underlying price growth accelerated to 5–6% primarily because of a temporary reduction in production capacities in certain sectors, annual inflation reached 6.3% on 7 September and proinflationary risks increased, while it maintained that further decisions would depend on inflation, inflation expectations and risks from domestic and external conditions.