Russia’s Central Bank slashed its key interest rate to 15.5% at its first rate-setting meeting of the year on Friday, continuing a streak of cuts that saw five reductions last year.
Policymakers said in a statement announcing the rate decrease that the economy “continues to return to a balanced growth path” despite what they described as a “considerable” but temporary rise in the cost of goods in January after the government increased the value-added tax and expanded the number of small businesses required to pay the levy on consumption.
While the Central Bank said it expects to reduce borrowing costs further this year, it wants to see evidence that inflation is moving closer to its target of 4%. According to the bank, inflation stood 6.3% as of Feb. 9, down significantly from a year ago.
Sofia Donets, chief economist at T-Bank, said policymakers on Friday gave their strongest signal for easing monetary policy since 2023 by keeping the door open for further rate cuts this year.
“For now, this guidance is conditional and tied to how inflation progresses,” Donets said. “Still, it’s a sign that a turning point may be near.”
Russia’s Central Bank has been cautious in lowering the key rate after hiking it to a two-decade high of 21% in September 2024 to curb surging inflation, largely driven by huge military spending and tightening labor market conditions.
High borrowing costs have stunted investment and led to sluggish economic growth.
Russia saw its GDP increase by just 1% in 2025, President Vladimir Putin said at a government meeting last week.
“But we also know that this slowdown was not simply expected. One could even say it was man-made,” Putin told the gathering of officials. “It was connected with targeted measures to reduce inflation.”
While Russia has dramatically boosted spending on the military, it has also faced falling revenues. In January alone, Russia’s budget deficit jumped to nearly half of its full-year 2026 target of 3.8 trillion rubles ($49.4 billion).
And this month, Russia’s Finance Ministry said oil and gas revenues for January totaled 393.3 billion rubles ($4.29 billion). That came at 32% below the planned target and only half the amount recorded for January 2025.
The shortfall has largely been driven by low global oil prices, higher discounts on Russian crude and a stronger ruble. Meanwhile, there is uncertainty over the continued export of Russian oil to India, which has come under pressure from the Trump administration to end its purchases from Moscow.
This is a breaking news story.
A Message from The Moscow Times:
Dear readers,
We are facing unprecedented challenges. Russia's Prosecutor General's Office has designated The Moscow Times as an "undesirable" organization, criminalizing our work and putting our staff at risk of prosecution. This follows our earlier unjust labeling as a "foreign agent."
These actions are direct attempts to silence independent journalism in Russia. The authorities claim our work "discredits the decisions of the Russian leadership." We see things differently: we strive to provide accurate, unbiased reporting on Russia.
We, the journalists of The Moscow Times, refuse to be silenced. But to continue our work, we need your help.
Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just $2. It's quick to set up, and every contribution makes a significant impact.
By supporting The Moscow Times, you're defending open, independent journalism in the face of repression. Thank you for standing with us.
Remind me later.
