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Putin demands rate cut, Bank of Russia complies with surprise reduction
🇵🇱 Poland /Economy & Trade

Putin demands rate cut, Bank of Russia complies with surprise reduction

From Rzeczpospolita · () Polish

Translated from Polish, summarized and contextualized by DistantNews.

At a glance

News Named sources New plan
  • The Bank of Russia unexpectedly lowered its key interest rate from 14.25% to 14%, a move not justified by the current state of the Russian economy.
  • The decision follows President Putin's demand for easier monetary policy, despite rising inflation and a growing budget deficit.
  • Analysts and Russian businesses expected the central bank to pause rate cuts due to poor economic conditions, with some predicting a future increase in rates.

The Bank of Russia's board of directors made an unexpected decision to lower the key interest rate from 14.25% to 14%. This move lacks justification based on the current state of the Russian economy, which faces accelerating inflation due to a fuel crisis and deteriorating public finances from a growing budget deficit.

rate cuts should be a natural process based on macroeconomic indicators and economic stability.

— Vladimir PutinDemanding easier monetary policy from the Bank of Russia.

Just ten days prior, President Vladimir Putin had publicly called for a loosening of monetary policy, stating that rate cuts should be a "natural process based on macroeconomic indicators and economic stability." He asserted that the economy was stable and developing, a view sharply contrasted by Russian business and analysts cited by "The Moscow Times."

These experts anticipated a pause in the central bank's rate cuts, which have been ongoing since June 2025 from a high of 21%. They pointed to the poor economic conditions as a reason for the central bank to hold steady. Earlier statements from Bank of Russia head Elvira Nabiullina had indicated that future decisions on the base rate would depend on inflation dynamics, inflation expectations, and an assessment of domestic and external risks.

This might be the last rate cut.

— Egor SusinAn economist commenting on the Bank of Russia's unexpected rate reduction.

Following the surprise reduction, Nabiullina described the decision as a one-off measure. The Bank of Russia's new forecast suggests the average base rate will be between 13.7% and 14% by year-end, with inflation projected to reach 7%. However, consumers report price increases at least double that rate. Business sentiment, according to the newspaper RBK, is at its worst since May 2022. Economist Egor Susin suggested this might be the last rate cut this year, while Sovcombank chief economist Mikhail Vasiliev believes rates will rise later in the year. The central bank itself acknowledged being in a "trap" with rising prices and slow economic growth, noting that businesses have significantly lowered expectations for demand and production, leading to a forecast that Russia's GDP might not grow at all this year, a first for such a projection.

The Bank of Russia surprised with its leniency.

— Mikhail VasilievThe chief economist of Sovcombank on the central bank's decision.
DistantNews Editorial

Originally published by Rzeczpospolita in Polish. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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