The Russian Central Bank announced today (Friday) a reduction of its key interest rate by 200 basis points, bringing it down to 18%. This decision aligns with analysts’ expectations and comes amid a slowdown in inflationary pressures and increasing calls from officials and business sectors to support economic growth and prevent a recession.
The Central Bank’s decision is part of broader efforts to stimulate lending and boost economic expansion, which is projected to significantly slow this year. The Russian economy has faced major challenges in recent years, largely due to international sanctions linked to the conflict in Ukraine and increased government spending, particularly in the military sector, both of which have fueled strong inflationary pressures.
In October 2024, the Central Bank had raised the interest rate to 21%, the highest level since 2003, in response to inflation reaching 8.4% at that time. However, recent data indicates a slowdown in inflation, with the weekly consumer price index recording a 0.05% decline—the first such drop since September 2024. Annual inflation has also eased to 9.17%, down from its peak of 10.3% in March 2025.
The Central Bank has faced mounting pressure from business leaders, including heads of major oil and defense companies, who have argued that high interest rates are hindering investment. Although President Vladimir Putin has supported the Central Bank’s stance, he has warned against excessively tightening monetary policy. In June 2025, the Bank cut the interest rate for the first time since September 2022 by 100 basis points, setting it at 20%, citing easing inflationary pressures.
Today’s decision coincides with an adjustment in inflation forecasts for 2025, now projected to fall within the range of 6-7%, down from the previous estimate of 7-8%. This reflects the Bank’s growing optimism regarding continued inflation moderation. Nevertheless, it emphasized that monetary policy will remain tight to ensure inflation returns to the target of 4% by 2026. This approach has also influenced the ruble, which had previously surged by 45% against the U.S. dollar earlier this year but has since weakened, reaching 80 rubles per dollar today.
— news from ArabsNew.com