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The Central Bank of Russia lowered its benchmark interest rate from 21% to 20% on Friday, marking its first rate cut since September 2022.
The move was welcomed by international investors, as the ruble gained more than 2% against the U.S. dollar, with the USD/RUB exchange rate reaching 78.8500.
In its statement, the bank noted that inflationary pressure has continued to ease in recent months. It also pointed out that domestic demand is growing faster than the supply of goods and services, contributing to economic imbalances.
Nevertheless, it said the Russian economy has entered a period of balanced growth.
According to preliminary data, Russia’s gross domestic product (GDP) grew by 1.4% in the first quarter of 2025—a sharp slowdown from 5.4% growth recorded in the same period a year earlier.
Despite the cut, the central bank reaffirmed its commitment to a tight monetary stance until inflation reaches its target level, which it now expects by 2026. Future rate decisions will depend on inflation dynamics and expectations.
The bank projects that inflation will fall to 4% next year if current policies remain in place.
The central bank had raised the key rate to 20% immediately after the onset of the war in Ukraine. It then maintained the rate at 16% from late 2023 to July 2024 before implementing four consecutive hikes in 2024 to fight rising inflation.
The most recent hike occurred on October 25, 2024, when the bank raised the rate by 200 basis points to 21%.
With annual inflation currently around 10%, the central bank aims to bring it down by more than half over the next year.
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