Key facts
- The Russian central bank lowered its key interest rate by 25 basis points to 14% from 14.25%.
- The rate cut was a surprise to most analysts who expected it to remain on hold.
- Inflation has risen, with annual inflation at 6% and petrol prices up 16% year-to-date.
- The central bank cut its economic growth forecast for the year to 0-1%.
- Inflation forecasts for 2026 were increased to 6-7%.
The Russian central bank unexpectedly lowered its key interest rate by 25 basis points to 14% on Friday, a move that defied most analyst expectations. The decision comes amid rising inflation, with annual inflation at 6% and petrol prices up 16% year-to-date, largely attributed to Ukrainian drone attacks on major oil refineries and e-commerce warehouses. These attacks have disrupted gasoline supply and impacted the consumer economy. The central bank also revised its economic growth forecast downwards to between zero and 1% for the year, down from a previous projection of 0.5% to 1.5%. Furthermore, the bank raised its inflation forecast for the second quarter of 2026 to between 6% and 7%, citing considerable price growth and higher inflation expectations. Household inflation expectations have reached their highest level since March 2022. President Vladimir Putin had previously met with central bank officials and expressed expectations for rate cuts, which some economists interpreted as a signal. Political pressure on the central bank to reduce rates had been mounting.