Bank of Russia cuts key rate to 14% per annum

Lead

The Bank of Russia has cut its key interest rate by 25 basis points to 14% per annum, according to the regulator's press release following its board meeting. The decision, announced on July 24, came contrary to analysts' forecasts that the rate would remain unchanged, as reported by TASS.

Coverage Comparison

The decision was covered by TASS in multiple articles, each focusing on different aspects. One report highlighted Governor Elvira Nabiullina's remarks about the deliberative process, noting that the bank gave substantive consideration to both keeping the rate unchanged and cutting it by 25 basis points, with isolated proposals to raise it. Another piece compiled the regulator's updated economic forecasts, while a third emphasized that the cut defied analysts' expectations and underscored the need for a more gradual easing path.

Key Claims

The Bank of Russia cut its key rate by 25 basis points to 14% per annum, a move that was contrary to analysts' forecasts that it would remain unchanged. Governor Elvira Nabiullina explained that the board considered two main options—keeping the rate steady or cutting it by 25 basis points—with some isolated proposals to raise it. She noted that the bank analyzed the fuel situation, which she described as a supply shock, and that monetary policy responds to such shocks if they have pronounced second-round effects and feed into persistent inflation.

According to the regulator's press release, considerable price growth and higher inflation expectations in the summer months were mainly associated with one-off factors. Measures of underlying inflation remained within the range of 4-5% in annualized terms, the bank said. However, the regulator also pointed to the need for a more gradual rate decrease, citing the direct and second-round effects of a temporary decline in production capacities in certain sectors and a more expansionary fiscal policy over a three-year horizon than projected in April.

The Central Bank sees the government taking measures to stabilize the fuel market, Nabiullina said. Annual inflation in Russia is projected to reach 6-7% in 2026 due to the significant rise in fuel prices, before returning to the target level in 2027. As of July 20, annual inflation stood at 5.9%.

The bank also released updated forecasts for key economic indicators. The average key rate forecast for 2026 was upgraded from 14-14.5% to 14.5-14.6%. For 2027, the forecast was revised upward from 8-10% to 10.5-12.5%, and for 2028 from 7.5-8.5% to 8-9%. The forecast for 2029 stands at 7.5-8.5%.

GDP growth forecasts for 2026 were revised downward from 0.5-1.5% to 0-1%. The forecasts for 2027 and 2028 were unchanged at 1.5-2.5%, and the bank expects the same range for 2029.

The Central Bank downgraded its forecast for the oil price used for taxation purposes in 2026 from $65 to $60 per barrel. The bank maintained its forecast for mortgage lending growth in 2026 at 6-10%.

Governor Nabiullina emphasized that the bank's decision was made after substantive consideration of both options, reflecting a balanced approach to monetary policy amid supply shocks and evolving fiscal conditions.