Russia’s Central Bank Delivers 200 bps Rate Cut as Inflation Slows

On Friday, Russia’s central bank slashed its benchmark rate from 20% to 18%, matching economists’ expectations and marking its biggest cut in over three years. The move follows signs that consumer prices are cooling—CPI even dipped 0.05% week-on-week—and annual inflation has eased from a 10.3% peak in March to 9.17%.

Having hiked aggressively since mid-2023 to curb overheating from surging military spending, the bank now projects 2025 inflation at 6–7% and maintains its 2024–25 GDP growth outlook of 1–2%. While businesses and Deputy PM Marat Khusnullin have pushed for steeper cuts—some calling for a 400 bps move—Governor Elvira Nabiullina and President Putin have balanced the need to revive lending against the goal of returning inflation to the 4% target by 2026. The rouble, which had strengthened sharply this year, eased ahead of the cut, aiding disinflation by making imports cheaper.