Russia’s Central Bank Slashes Interest Rate by 200 Basis Points

The Central Bank of Russia cut its key interest rate by a dramatic 200 basis points on Friday, bringing it down to 18% in the country’s largest rate reduction since May 2022.

 The move comes as part of an effort to stimulate lending and revive a slowing economy, amid early signs that inflation may be cooling.

The decision aligns with expectations from a Reuters poll of 27 economists and reflects mounting pressure from Russian business leaders and some government officials, who argue that high borrowing costs are stifling economic activity.

Friday's cut follows a series of aggressive hikes that began in July 2023, when the central bank raised rates in response to surging military spending and overheating in various sectors of the economy. Those measures, while aimed at stabilizing prices, have pushed Russia dangerously close to recession, according to comments made by the Russian Minister of Economy last month.

This latest reduction also marks the most significant monetary policy easing since the 300-point rate cut in May 2022, which came in the wake of Western sanctions following the launch of Russia’s military campaign in Ukraine.

Alongside the rate cut, the central bank revised its inflation forecast for 2025, lowering it to a range of 6% to 7%, down from the previous projection of 7% to 8%. Officials cited faster-than-expected declines in inflationary pressure as a key factor in the policy shift.