Russian CB cuts key rate to 20%, inflation slowing down

The Russian central bank cut its key interest rate by one percentage point to 20 per cent on Friday, saying economic growth is cooling down and inflation is slowing.

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“Current inflationary pressures, including underlying ones, continue to decline. While domestic demand growth is still outstripping the capabilities to expand the supply of goods and services, the Russian economy is gradually returning to a balanced growth path,” the bank said in a statement.

A Reuters poll had predicted that the central bank would keep the key rate on hold. It had been at 21 per cent since last October to curb inflation in the overheated economy, which is focused on the needs of the military fighting in Ukraine.

As a result, Russia’s economic growth rate fell to 1.5 per cent year-on-year in the first four months of 2025, compared to 4.3 per cent last year, prompting sharp criticism of central bank governor Elvira Nabiullina.

Consumer prices have risen by 3.39 per cent since the start of the year, compared to 3.88 per cent in the same period last year, while the annualised inflation rate fell below 10 per cent in May after peaking at 10.34 percent in March.

The central bank forecasts inflation this year at 7 per cent to 8 per cent and economic growth at 1 per cent to 2 per cent. The Economy Ministry is more optimistic, predicting growth of 2.5 per cent.

The strengthening of the rouble, which has rallied by about 40 per cent against the dollar since the start of the year, has aided the central bank in its fight against inflation by making imported goods cheaper.