Russia lowers key rate to 14.25% as inflation eases, risks stay elevated

Russia’s central bank on Friday cut its policy rate by 25 basis points to 14.25%, citing a partial easing in underlying price growth while warning that inflation risks remain elevated.

Markets had expected the bank to cut the rate by 50 basis points to 14%.

“On June 19, 2026, the Bank of Russia Board of Directors decided to cut the key rate by 25 basis points to 14.25% per annum,” the bank said in a statement.

The bank said economic growth continues at a moderate pace after a temporary decline at the beginning of the year, while underlying price growth has edged down but remains broadly in the 4% to 5% range in annualized terms.

It noted that lending growth has accelerated in recent months and said fiscal policy over the next three years is expected to be more accommodative than previously projected, a factor that could require a higher key-rate path than assumed in the bank’s April baseline scenario.

The bank said further rate cuts will be assessed at upcoming meetings depending on the sustainability of the inflation slowdown, inflation expectations and risks from domestic and external conditions.

According to the bank’s forecast, annual inflation is expected to fall to 4.5% to 5.5% in 2026, while underlying inflation is projected to be close to 4% in the second half of the year. Inflation is expected to remain on target from 2027 onward.

Seasonally adjusted price growth slowed to an annualized average of 2.1% in April and May from 8.7% in the first quarter, while core inflation eased to 4.2% from 6.2%, the bank said.

Annual inflation stood at 5.6% as of June 15, while household and business inflation expectations declined but remained elevated, it added.

The central bank said economic activity improved in the second quarter after a first-quarter decline, with consumer demand accelerating in recent months and investment activity rising only slightly after cooling at the beginning of the year.

It also said unemployment remains at record lows, while wage growth continues to outpace labor productivity.

The Bank of Russia last cut its key rate by 50 basis points to 14.5% at its April 24 meeting. Its next rate-setting meeting is scheduled for July 24.