The Central Bank of Russia has reduced its key interest rate for the sixth consecutive time, lowering it by 0.5% to 15.5%. This decision aims to support an economy that is experiencing a slowdown due to the financial burdens of ongoing military operations and international sanctions.
Despite widespread expectations among analysts that the rate would remain unchanged due to high inflation, the Central Bank stated that the recent surge in inflation is attributed to temporary factors. They anticipate that once these factors dissipate, a trend toward disinflation will resume.
Elvira Nabiullina, the head of the Central Bank, indicated that inflation may have already peaked, suggesting that further easing of monetary policy could occur in upcoming meetings.
In January, annual inflation reportedly rose to approximately 6.5%, up from 5.6% at the end of 2025. Business expectations have reached their highest level since 2022, while public inflation expectations remain at 13.7%.
The Central Bank has cautioned that elevated inflation expectations could hinder a sustainable slowdown in prices. They project a return to an inflation rate of 4% in the latter half of the year, although they have revised their forecast for 2026 upwards to a range of 4.5% to 5.5%.
Another significant risk identified is the fluctuation in oil prices. A further decline in oil prices could exacerbate inflationary pressures on the Russian economy.
Overall, the Russian economy has slowed to a growth rate of 1% last year, down from 4.9% the previous year. The prolonged period of high interest rates complicates debt servicing for businesses, leading banks to increasingly restructure loans, while larger companies are seeking state support.
Some economists believe that the GDP growth forecast for 2026, estimated between 0.5% and 1.5%, may be overly optimistic. Should the slowdown continue, the Central Bank may need to implement more aggressive rate cuts. The next decision regarding the key interest rate is anticipated on March 20, 2026.
The Central Bank of Russia has lowered its key interest rate in response to economic challenges, including high inflation and the impacts of sanctions. While some analysts express skepticism about growth forecasts, the bank aims to stabilize the economy through these monetary policy adjustments.