The Bank of Russia has lowered its key interest rate from 20% to 18% per annum, marking the second straight cut in its monetary policy stance. This time, however, the central bank took a bolder step, although it stopped short of signaling a shift to a more dovish approach.
According to the official statement, the rate cut reflects a faster-than-expected decline in inflationary pressures, both headline and underlying. The regulator noted that domestic demand growth is slowing, and the economy is gradually returning to a path of balanced growth.
“The Bank of Russia will maintain a tight monetary policy stance necessary to bring inflation back to target by 2026,” the central bank said.
Under its baseline scenario, the average key rate is expected to range between 18.8% and 19.6% in 2025, and between 12% and 13% in 2026 — implying a prolonged period of restrictive monetary conditions. Future rate decisions will depend on the persistence of disinflation and the trajectory of inflation expectations, the statement added.
The inflation outlook has improved ahead of the central bank’s July meeting. Seasonally adjusted monthly inflation stood at 4% in June, according to the regulator’s analysts. Annual inflation declined to 9.4% in June, down from 9.88% in May. Preliminary data from Rosstat also indicated a slowdown in July inflation, excluding the first week of the month when utility tariffs were indexed. Notably, in the week prior to the rate meeting, Rosstat recorded the first deflationary reading of 2025, with the consumer price index falling 0.05%.
The central bank emphasized that tight monetary policy is increasingly weighing on demand, which is helping to ease inflationary pressures. However, it cautioned that price dynamics remain uneven and that a sustained downward trend in inflation expectations has yet to take hold.