Russian Central Bank Cuts Key Interest Rate Less Than Expected

The Russian Central Bank announced a modest 0.25 percentage point reduction in its key interest rate, bringing it down to 14.25%. This move fell short of the more significant decrease anticipated by the business sector, which had been advocating for greater stimulus to prevent economic stagnation.

This decision represents the ninth consecutive rate cut since June 2025, when the benchmark rate was as high as 21%. The Central Bank stated that economic growth is continuing at a moderate pace following an earlier slowdown. Inflation has reportedly moderated slightly, with the current rate estimated around 5.6%, although inflationary expectations remain elevated.

Despite the rate cut, the Central Bank acknowledged that pro-inflationary risks continue to outweigh disinflationary pressures in the medium term. Factors contributing to these risks include a decrease in hydrocarbon production, exacerbated by Ukrainian attacks on Russian oil infrastructure. Conversely, disinflationary risks are linked to a more significant slowdown in domestic demand, which has shown poor performance recently, alongside a high number of business closures nationwide.

Business leaders had called for a more substantial rate reduction. Alexander Shokhin, president of the Russian Union of Industrialists and Entrepreneurs, suggested that a full percentage point cut would be optimal to invigorate the economy, noting a severe drop in investment across most sectors, with the exception of the military industry. Central Bank Chair Elvira Nabiullina was expected to provide further explanation on the monetary policy decisions.