ISTANBUL

The Russian Central Bank decided Friday to lower its key interest rate by 200 basis points to 18%, as it stated that the inflationary pressures are declining faster than estimated.

The key rate currently stands at its 9-month low, as the decision marked the second consecutive rate cut.

"Current inflationary pressures, including underlying ones, are declining faster than previously forecast," the bank said in a statement.

The bank noted that the domestic demand growth is slowing and the economy continues to return to a balanced growth path.

It stated that it will maintain monetary conditions as tight as necessary to return inflation to the target in 2026.

"In the baseline scenario, this implies an average key rate in the range of 18.8–19.6% per annum in 2025 and 12.0–13.0% per annum in 2026 and means that monetary policy will remain tight for a long period," the bank noted.

It added that the inflation rate will fall to 4% next year in line with current monetary policy.

The Central Bank of Russia raised its policy rate to 20% immediately after the outbreak of the Russian-Ukrainian War.

The policy rate was held at 16% from the end of 2023 until the end of July 2024, with four consecutive interest rate increases in 2024.

In its June meeting, the bank lowered its policy rate for the first time since September 2022, from 21% to 20%.

While the annual inflation in the country was at 9.4% in June, the bank aims to reduce this rate to 4%.