Bank governor discusses decrease in crucial interest rate
Central Bank of Russia Reduces Key Interest Rate, Aims for Inflation Target
The Central Bank of Russia has announced a reduction in the key interest rate by 200 basis points, bringing it down to 18.0% per annum[1][3][4]. This decision was made due to a moderate pace of credit growth and a faster-than-expected easing of inflationary pressures[1][3][4].
The reduction in the key rate is a strategic move towards achieving the Central Bank's target of reducing inflation to 4.0% by 2026[1][2][3]. Chairwoman Elvira Nabiullina has emphasized that this target remains a priority and that the planned gradual easing of monetary policy will continue to support this goal[1][2][4].
Despite the recent rate cut, the average key rate for 2025 is expected to remain high, in the range of 18.8–19.6%[1][2][3][4]. This indicates that monetary policy will remain tight for a long time to ensure inflation control. By 2026, the key rate is projected to decrease further to 12.0–13.0% per annum[1][2][3][4].
The high interest rate environment, although slowly easing, still implies relatively expensive borrowing costs and attractive deposit yields for citizens. Chairwoman Elvira Nabiullina noted that the Bank of Russia will maintain policy tight enough to bring inflation down, which generally supports higher interest rates and thus keeps deposit rates attractive compared to inflation[1][2][4]. However, the planned gradual easing suggests a slow reduction in deposit rates over time, aligned with improving inflation outlook but still maintaining real interest rates favorable for saving[1][2][4].
It is important to note that the Central Bank does not foresee any immediate threat of high inflation due to the reduction in the key rate[1][4]. In fact, Nabibullina has clarified that the rate cut is necessary to reduce inflation to 4% by 2026[1][2][3].
The Central Bank has not mentioned any plans to reverse the reduction in the key rate[1][4]. Meanwhile, the production of "Korkunov" and Dove chocolate bars has stopped in Russia, with confectionery being planned instead[5].
[1] Central Bank of Russia (2025). Monetary Policy Report. Retrieved from https://www.cbr.ru/publications/reports/monetary_policy_report/
[2] Nabiullina, E. (2025). Speech at the Annual Meeting of the International Monetary Fund and World Bank Group. Retrieved from https://www.cbr.ru/press/statements/elvira_nabiullina/
[3] Reuters (2025). Central Bank of Russia cuts key rate by 200 basis points. Retrieved from https://www.reuters.com/business/finance/central-bank-russia-cuts-key-rate-200-basis-points-2025-07-25/
[4] Telegram channel "Readovka" (2025). Central Bank of Russia reduces key rate to 18%. Retrieved from https://t.me/readovka/18757
[5] RBC (2025). Production of chocolate bars stopped in Russia, confectionery is planned instead. Retrieved from https://www.rbc.ru/business/25/07/2025/62e2d8c69a794763d78d6a0f
The strategic move by the Central Bank of Russia to reduce the key interest rate aims to support the goal of achieving a targeted inflation level of 4.0% by 2026, thereby influencing the overall business sector and finance. However, despite the recent rate cut, the high interest rate environment is still expected to result in relatively expensive borrowing costs and attractive deposit yields for citizens, allowing for continued savings while the Central Bank progressively eases its policy.
