On July 25, 2025, the Bank of Russia's Board of Directors decided to reduce the key rate by 200 basis points to 18.00% per annum. This decision comes as inflationary pressures, including underlying ones, are decreasing faster than previously anticipated, and domestic demand growth is slowing. The economy is moving towards a balanced growth path.
The Bank of Russia plans to maintain tight monetary conditions to achieve its inflation target in 2026. The baseline scenario suggests an average key rate between 18.8–19.6% per annum in 2025 and between 12.0–13.0% per annum in 2026, indicating that monetary policy will remain stringent for an extended period. Future decisions on the key rate will depend on the sustainability of the inflation slowdown and changes in inflation expectations.
According to the Bank of Russia's forecast, annual inflation is expected to decrease to between 6.0–7.0% in 2025 and return to 4.0% in 2026, maintaining this target thereafter.
In Q2 of 2025, seasonally adjusted price growth fell to an annualized rate of 4.8%, down from an average of 8.2% in Q1 of the same year. Core inflation also decreased from an average of 8.8% in the previous quarter to a similar indicator value of 4.5%. As of July 21st, annual inflation stood at 9.2%. However, a temporary rise in consumer price index is expected due to significant adjustments in utility tariffs.
The effects of tight monetary policy are increasingly visible through reduced demand and lower inflationary pressures, particularly noticeable with non-food product prices due to ruble appreciation.
Despite these trends, a stable downward trajectory for inflation expectations has not yet formed; long-term expectations have slightly decreased while analysts' and households' expectations remain largely unchanged.
The Russian economy's deviation from balanced growth is narrowing as domestic demand slows further with moderate economic activity growth overall.
Signs indicate labor market softening as fewer enterprises report labor shortages and there is employee reallocation across industries; however wages continue rising faster than productivity despite slower increases compared with last year.
Monetary conditions stay tight under current policies alongside autonomous factors affecting nominal interest rates which have declined since June but remain high relative terms; lending dynamics vary across segments showing declines unsecured consumer loans contrasted by modest increases mortgage corporate portfolios overall subdued activity observed here too despite lower deposit rates household savings propensity remains strong nonetheless
Proinflationary risks outweigh disinflationary ones mid-term horizon primarily driven prolonged economic imbalance high expectation deterioration external trade terms geopolitical tensions uncertainty factors global economic slowdown potential oil price drops could impact ruble exchange rates exacerbating situation whereas disinflation arises greater lending domestic demand slowdowns under persistent constraints fiscal normalization predicted exert calming influence yet necessitate possible policy adjustments future accordingly
Following its meeting on July twenty-fifth updated medium-term forecasts released August sixth summary discussion commentary forthcoming September twelfth next scheduled board session decision announcement time specified herein statement Governor Elvira Nabiullina follows directors' meeting date reference press service mandatory usage material provided therein