(Feb 13): Russia’s central bank lowered borrowing costs for the sixth straight time, delivering modest relief to businesses struggling under high interest rates even as inflation quickened.
The Bank of Russia cut the benchmark rate by 50 basis points to 15.5% on Friday, a move predicted by just two of eight economists surveyed by Bloomberg. The rest expected officials to hold.
“In January, price growth accelerated significantly due to one-off factors,” policymakers said in a statement announcing the decision. Still, they estimate underlying dynamics have shifted considerably, and “after the effect of one-off factors fades, disinflation will continue.”
The economy has come under increasing strain from high borrowing costs, with growth slowing to 1% last year from 4.9% a year earlier. Still, a hike this year in the value-added tax, introduced to narrow the budget deficit without reducing spending, has renewed worries that a slowdown in price growth could go off track.
Governor Elvira Nabiullina warned at the end of 2025 that breaks in monetary easing may be needed to bring inflation down to the bank’s 4% target — a goal it has missed for six consecutive years. Persistently elevated inflation expectations — a key indicator guiding monetary policy — alongside a price spike following the tax hike and a separate utility tariff increase could derail progress for a seventh straight year.
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Nabiullina will hold a briefing at 3pm Moscow time.
The economic fallout from Russia’s ongoing military invasion of Ukraine and subsequent Western sanctions have complicated the central bank’s efforts to rein in inflation.
Annual price growth likely accelerated in January to 6.45% from 5.59% at the end of 2025, a consensus forecast shows. Monthly inflation is estimated at 2%, compared with the 1.95% pace needed to stay on track to achieve the central bank’s goal. Inflation data is scheduled to be released at 7pm Moscow time.
Inflation expectations among businesses rose in January to the highest level since 2022, while household inflation expectations remained at a one-year high of 13.7%.
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Elevated expectations “may impede a sustainable slowdown in inflation,” the bank said in its statement.
Preliminary data show inflation slowing in February and business expectations falling sharply, suggesting the shock may have been short-lived.
The central bank said it expects price growth to decline to 4% in the second half of the year, though it raised its inflation forecast for 2026 to 4.5-5.5% from 4-5%.
| Bank of Russia Outlook | ||
|---|---|---|
| Updated Forecast | Previous Forecast | |
| 2026 Inflation | 4.5%-5.5% | 4%-5% |
| 2027 Inflation | 4% | 4% |
| 2026 GDP | 0.5%-1.5% | 0.5%-1.5% |
| Key Rate Average | 13.5%-14.5% | 13%-15% |
| Avg. Price of Oil, $/barrel | 45 | 55 |
Policymakers began aggressively cutting the key rate from a record 21% in June last year, after early signs of easing price pressure. By the end of 2025, the pace of rate reductions had slowed. The prolonged period of elevated borrowing costs is straining companies’ ability to service debt, while banks are increasingly restructuring loans to mitigate difficulties.
Meanwhile, some of the country’s largest firms are seeking government support to manage heavy debt loads amid pressure from weaker demand.
The central bank will hold its next key rate decision on March 20.
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