Russia: Bank of Russia cuts rate in October
Bank reduces rates as expected: At its meeting on 24 October, the Bank of Russia decided to cut the policy interest rate by 50 basis points to 16.50% per annum, matching market expectations. The cut was the fourth in a row—though the smallest so far—and brought total reductions to 450 basis points since the easing cycle began in June 2025. That said, the policy interest rate remains at one of the highest levels on record.
GDP growth calls for rate cuts, but high inflation keeps the scissors sheathed: The Central Bank’s decision was primarily driven by high inflation expectations and the need to steer the economy back to a balanced growth path. While rates were cut to stimulate activity, the move reflected a careful balancing act—seeking to fuel growth without fanning prices, which have remained above the 4.0% target amid rapid credit expansion. Still, the bank noted that medium-term inflationary risks have heightened: The effects of the VAT increase, the deterioration of external trade and a further decline in oil prices in the case of escalating trade disputes may all fan prices through the ruble exchange rate dynamics.
Bank to cut more but maintain a tight monetary policy stance: The Bank of Russia indicated that it would maintain tight monetary conditions as long as necessary in order to return inflation to its target, suggesting an average key rate in the range of 13.0–15.0% per annum in 2026. Still, our Consensus is for the Bank of Russia to implement rate cuts in 2026, bringing the terminal rate below the level the Bank currently projects for December 2026.