Summary of the Key Rate Discussion released
The publication covers the main aspects of the discussion about the economic situation and inflation, monetary and external conditions, and alternatives to the key rate decision.
According to the participants in the discussion, the economic situation was generally developing in line with the Bank of Russia’s forecast. Tight monetary conditions continued to contain inflationary pressures. Though current inflation was growing over recent months, its underlying measures remained within the range of 4–6%.
Concurrently, new proinflationary factors emerged, such as the VAT increase in 2026, the indexation of utility tariffs at a higher rate, changes in the calculation of the recycling fee, and the situation in the fuel market. Although these factors are one-off in nature, their simultaneous effect may raise inflation expectations.
Most discussants agreed that a full offset of these factors through monetary policy measures might lead to an excessive cooling of the economy and a subsequent deviation of inflation from the target. Therefore, it is necessary to continue cutting the key rate, albeit at a slower pace, and revise upwards the projected key rate path.
Following the discussion, the Board of Directors decided to cut the key rate by 50 bp to 16.50% per annum. Further decisions will depend on the sustainability of the decrease in inflation and the dynamics of inflation expectations.
According to the Bank of Russia's forecast, underlying inflation will reach 4% in 2026 H2. Annual inflation is expected to equal 4.0–5.0% in 2026. In 2027 and onwards, annual inflation will remain at the target.
More details on the economic developments are available in the Commentary on the Bank of Russia’s Medium-term Forecast.