Russian central bank unexpectedly cuts policy rate by 50 basis points

ISTANBUL

The Bank of Russia on Friday decided to lower its key interest rate by 50 basis points to 15.5%, saying the Russian economy continues to return to a balanced growth path.

The markets had expected the central bank to keep the policy rate unchanged at 16%.

The key rate currently stands at its 19-month low, as the decision marked the sixth consecutive rate cut.

"In January, price growth accelerated significantly due to one-off factors. However, the Bank of Russia estimates that the underlying measures of current price growth have not changed considerably," the central bank said in a statement.

The bank emphasized that the disinflation process will continue after the effect of one-off factors fades.

"The Bank of Russia will assess the need for a further key rate cut at its upcoming meetings depending on the sustainability of the inflation slowdown and the dynamics of inflation expectations," it noted.

According to the central bank's forecast, given the monetary policy stance, the policy rate will range from 13.5% to 14.5% this year. "This means that monetary conditions will remain tight."

The annual inflation, according to the bank's forecast, will decline to 4.5–5.5% in 2026. And in 2027 and beyond, annual inflation will stay on target.

Policy rate path

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%, to 18% in July, to 17% in September, to 16.5% in October, and to 16% in its previous meeting.

While the annual inflation in the country eased 5.6% in December 2025, the bank aims to reduce it to 4%.