Russian Central Bank Cuts Rates Despite Inflation

The Russian central bank unexpectedly cut its key interest rate to 14% from 14.25% on Friday, even as inflation in the country accelerates again.

Most analysts had expected rates to remain unchanged, particularly given rising fuel prices following Ukrainian drone attacks on Russian refineries and logistics centers.

The bank also significantly downgraded its economic outlook, acknowledging that the Russian economy may see virtually no growth this year. It lowered its growth estimate to 0%–1% and raised its inflation forecast for 2026 to 6%–7%.

Gasoline prices have risen 16% since the start of the year, and household inflation expectations are at their highest level since spring 2022. The rate cut came amid growing political pressure on the central bank.

President Vladimir Putin said this week that rate cuts should be a natural consequence of macroeconomic stability, a remark many economists interpreted as a clear signal to the bank.

(Reuters, mja)