Lowered key interest rates by the Russian Central Bank
In the face of a slowing economy and easing inflation, the Bank of Russia made a strategic move by cutting its interest rates from 20% to 18% in mid-2025 [2][4][5]. This decision reflects a concerted effort to support economic growth amid concerns of recession, with inflation still above target levels.
However, it's important to clarify that the 2022 context you mentioned does not align with the search results. The Bank of Russia initially raised rates sharply in 2022 and maintained a tight monetary policy before starting rate cuts in 2025 [1][2][5].
The recent rate cuts have several significant effects and implications.
Firstly, the cuts have contributed to an economic cooling and a slowdown in inflation. Inflation has dropped from over 10% in early 2025 to about 9.2% by mid-2025, and core inflation decreased substantially [5]. The cuts are meant to prevent the economy from sliding into recession [2][3].
Secondly, the Bank of Russia plans to keep rates relatively high (averaging around 18.8–19.6% for 2025 and 12–13% in 2026) to ensure inflation returns to the 4% target in 2026. This implies a cautious, tight monetary policy maintained over a long horizon [5].
Thirdly, the cuts aim to ease pressure on banks amid rising bad debt, balancing inflation control and financial stability [1].
Looking ahead, continued rate cuts are expected if inflation deceleration sustains; this could support domestic demand recovery without reigniting inflation. However, the central bank signals readiness to reverse cuts if inflation or inflation expectations rise again [3][5].
The high interest rates have been impacting businesses negatively, and some of the country's largest entrepreneurs have put pressure on the Central Bank to ease its monetary policy [6]. The slowdown in business and consumer activity is expected to continue [7], but the recent rate cuts are a step towards easing this burden.
Despite the challenges, the Russian economy has surprisingly withstood Western sanctions over the past two years [8]. The future will likely see a cautious approach to monetary easing contingent on inflation dynamics and economic performance [1][2][3][5].
References:
- Bloomberg
- The Moscow Times
- Reuters
- The Wall Street Journal
- Central Bank of the Russian Federation
- Forbes Russia
- RT
- The Guardian
The community and businesses within the Russian economy are advocating for a reconsideration of the employment policy, as high interest rates have negatively impacted various businesses. To alleviate this burden and support economic growth, the Bank of Russia has implemented employment policy adjustments, including a reduction in interest rates, which should continue if inflation deceleration is sustained. Concurrently, the finance sector is under pressure due to rising bad debt, necessitating a balance between inflation control and financial stability in the employment policy.
