- Decision
- Lower
- Rate change
- 50 bps
- key rate
- 16.5%
The Bank of Russia cut its key rate by 50 bp to 16.50 % per annum, citing still-elevated core price growth above 4 % annualised, high inflation expectations and a narrowing but persistent upward deviation of the economy from its balanced path amid faster lending. Building on four earlier reductions that have lowered the rate by a cumulative 450 bp since June, the central bank pledged to keep financial conditions “as tight as necessary”, envisaging an average policy rate of 13.0–15.0 % in 2026 and signalling a protracted period of restriction; market money and debt rates have already risen since mid-September as expectations for the rate trajectory moved higher. Seasonally adjusted consumer-price growth accelerated to 6.4 % annualised in Q3 from 4.4 % in Q2, core inflation held at 4.3 %, and headline inflation was 8.2 % on 20 October; it is projected at 6.5–7.0 % by end-2025 and 4.0–5.0 % in 2026, with underlying inflation expected to reach 4 % in H2 2026 and remain on target thereafter. High-frequency indicators show slower but positive activity, with domestic demand lifted by household incomes and budget spending even as export-oriented sectors cool; unemployment stays at record lows, although reported labour shortages are easing, and the 2025 credit growth forecast has been raised to 8–11 %. The Board highlighted prevailing pro-inflationary risks from the VAT increase, a possible worsening of external trade conditions, lower oil prices and ongoing geopolitical tensions, while softer domestic demand represents the main disinflationary offset. Future rate moves will hinge on the pace of disinflation and expectations, with the next decision due on 19 December 2025.
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.