The regulator has cut interest rates for the first time in almost three years
The Bank of Russia has lowered its key interest rate by 100 basis points to 20%, citing a slowdown in inflation. It is the first rate cut since 2022, when the regulator embarked on an aggressive monetary policy to stabilize the Russian economy in response to a raft of Western sanctions.
In a statement on Friday the central bank noted that “the high key rate has led to a significant slowdown in inflation.” According to Governor Elvira Nabiullina, the regulator is now “more confident” that the trend is sustainable. Annualized monthly inflation rate stood at 7% in March, according to Nabiullina, falling to approximately 6% in April.
The central bank stressed that the cut should not be seen as the beginning of a rapid easing cycle, pledging to “maintain monetary conditions as tight as necessary” to return inflation to its 4% target by 2026. Nabiullina warned that if inflation growth resumes the bank may raise the key rate again.
In response to sanctions imposed on Russia over the Ukraine conflict in February 2022, the Bank of Russia raised its key rate from 9.5% to 20% to stabilize the ruble and contain inflation. As conditions improved, the rate was cut to 7.5% by September 2022. However, renewed inflationary pressure led to a tightening cycle in mid-2023, with the rate peaking at 21% by October 2024.
While demand continues to exceed the domestic capacity to produce enough goods and services, the Russian economy is gradually getting back on a stable growth path, the regulator added.
After contracting by 1.2% in 2022, the Russian economy expanded by 3.6% in 2023 and 4.1% in 2024, supported in part by the central bank’s policies. Growth is expected to moderate in the coming years, with forecasts projecting growth of 1–2% in 2025 and up to 1.5% in 2026.
Experts welcomed the move as a positive signal for the economy. “This will revitalize key industries and reduce borrowing costs,” Maxim Chirkov, associate professor at the State University of Management, told Izvestia. Georgy Ostapkovich, director of the Center for Market Research at HSE University, called the decision “logical and expected,” though he noted the effects would take time to materialize. “A further rate cut to 17–18% is possible by year-end,” he predicted.
In currency markets, expectations are also cautiously optimistic. Financial University economist Petr Shcherbachenko told Lenta.ru that a sustained decline in inflation could support the ruble’s long-term strength.
