The board of the Central Bank of Russia has decided to cut the interest rate by 100 basis points to 20% per annum, marking the first reduction since September 2022.
This decrease follows lobbying efforts by businesses, senior officials, and politicians who criticized the prolonged anti-inflationary policy.
The Central Bank assured that it “will maintain the necessary restrictive monetary conditions to bring inflation back to the target set for 2026, which implies a long period of restrictive monetary policy.”
According to the bank, decisions on future interest rate policies will be based on the speed and sustainability of inflation reduction, as well as inflation expectations.
The financial institution clarified that inflation expectations remain high, which hinders the impact of current policies and their sustainability.
Currently, the institution states that inflation is at 9.8% and that data from May indicate a slowdown in price growth, “although with a significant increase in volatility.”
The Central Bank previously explained that for this year, it projects interest rates to be between 19.5% and 21.5%, while a drop to 13% or 14% is expected in 2026.
The entity has kept interest rates unchanged since October 2024 and forecasts an inflation rate of 7% for this year, while at the beginning of March it was officially at 10.34%, although some media outlets suggested it could be well above 20%.
However, the stringent policies of the Central Bank are stalling the Russian economy, generating criticism of its leader, Elvira Nabiulina, from various Russian politicians, including Prime Minister Mikhail Mishustin.
Due to the high interest rate policy, numerous financially unstable companies have gone bankrupt in recent months, although annual budget revenues from bankruptcy processes increased by 26% in 2024.
