Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting on 12 September 2025
Good afternoon. Today, we have made the decision to cut the key rate to 17% per annum.
Inflation has notably decreased since the beginning of the year, while external demand and economic activity growth has decelerated. Overall, this paves the way for cutting the key rate. Nevertheless, inflation expectations have remained heightened, the growth of corporate lending has sped up, while the uncertainty, including with regard to fiscal policy decisions, persists. In these conditions, we need to make our decisions cautiously, assessing further adjustment of monetary conditions and the response of markets.
I would now dwell on the reasons behind our today’s decision.
Firstly, inflation.
In August, the headline consumer price index traditionally declined, which was largely associated with the seasonal decrease in fruit and vegetable prices. Seasonally adjusted data show that price growth was approximately 4% in annualised terms. However, this does not mean that we have attained the target.
The deceleration in August was to a great extent explained by one-off and volatile factors. For instance, fruit and vegetable prices declined more than normally during this season, which was because of the surge in the first half of the year. Hotel prices dropped more significantly than usual. The most volatile prices for foreign travel and a number of food products were also down.
It is underlying inflation that we focus on, and its measures have stayed in the range of
This is critical when inflation expectations are elevated. They remain high and almost unchanged among all groups: households, businesses, and financial market participants. The double-digit indexation of utility rates could have negatively affected people’s expectations in August. Another possible factor was prices for petrol, which is one of the core goods impacting households’ expectations about future price growth. Fuel prices soared in the summer months. Given the Government’s measures to limit exports accompanied by the expansion of supply in the domestic market, we expect that the situation here will stabilise.
Secondly, the economy.
GDP dynamics in 2025 Q2 were slightly below our estimates, and output is still generally closer to the lower bound of our forecast for this year. Nevertheless, the sectors focusing on domestic demand have continued to expand, whereas export-oriented industries were rather contracting. This is the result of both lower prices in international commodity markets and the restrictions on Russian producers’ access to some global markets.
The vivid examples are the coal industry, oil production, and ferrous metallurgy. Companies in these industries faced a decline in revenues, while their costs increased. Revenues dropped due to the reduction in external demand and global prices. As for their costs, they increased because of the sanctions and considerable growth in prices for materials, components, and labour, caused by the overheating of domestic demand over the previous two years. According to our assessment, the deterioration of external conditions was the main reason for the decline in financial results of many mining and quarrying enterprises. Higher interest expenses were an additional negative factor for highly leveraged companies, but its impact was much weaker than the adverse effects of external market conditions.
Domestic demand generally continues to expand moderately. We expect that companies’ investment will grow this year, although less significantly compared to the record highs of
Consumer demand growth accelerated in July—August. The sectors that were witnessing a decrease in sales over previous periods now see the first signs of a rebound. For example, the demand for passenger cars and housing is rising. The fast increase in households’ incomes supports consumer demand.
Unemployment stays at a record low. Nevertheless, a number of companies have shortened the working week. Today, these approaches are only applied by a few enterprises. We can understand the companies that prefer to retain employees after a long period of the labour deficit, being wary of recruitment difficulties in the future. It is important that these measures should neither hamper workforce movement to enterprises that need to meet high demand for their products nor hinder the reallocation of manpower across regions and industries. Such reallocation will provide impetus to the expansion of output in general.
Thirdly, monetary conditions.
Interest rates in the economy have notably declined in recent months, adjusting to the earlier decisions on the key rate and market participants’ expectations about its reduction in the future. Deposit rates have dropped more notably than loan rates. This is typical of the phase of monetary policy easing. Different interest rates adjust at a different pace, but we will ultimately see that the downward movements will be comparable.
The reduction in interest rates has accelerated lending, especially in the corporate segment. Taking into account the statistics for July and high-frequency data for August, the increase in the loan portfolio is close to the upper bound of our forecast. If lending continues to grow at the same pace, the growth rate of claims on the economy this year will exceed our forecast.
Retail lending edged up in August as well, in both mortgage and unsecured lending. After a decline at the beginning of the year, the demand for car loans has been up over the past few month.
Saving activity remains high, although deposit rates have dropped. Higher incomes encourage both high savings and consumption growth.
We will continue to closely monitor the situation. Given the significant acceleration in lending, we will need to assess more thoroughly the extent to which monetary conditions contribute to further disinflation.
Briefly about external conditions.
Export and import dynamics are close to last year’s figures. However, the deteriorating external conditions might continue to exert pressure on export prices. The growth of imports has been more moderate amid tight monetary policy.
The ruble has depreciated since the previous meeting. The weakening of the national currency is yet another evidence that monetary conditions have eased.
I will now speak of risks.
Proinflationary risks continue to prevail.
They include inflation expectations that are still elevated, despite disinflation observed since the beginning of the year. The labour market still poses a significant risk as its tightness might persist for a long time or even increase further. There are also risks associated with an excessive rise in lending.
An important factor is demand from the government sector. Our baseline scenario assumes that government expenditures will have a disinflationary effect this year. However, this effect has not appeared so far. If the budget deficit exceeds the level predicted in our baseline scenario, we will have limited room for cutting the key rate.
As for disinflationary risks, it is a more considerable weakening of domestic demand.
Winding up, I would like to comment on our future decisions.
As usual, when discussing our future decisions, we will take into account information about the economic situation, lending, and certainly, inflation and inflation expectations. At our meeting in October, a lot will depend on the parameters of fiscal policy that will be ultimately proposed. Our policy is aimed at reaching the inflation target of 4% next year. This is essential for returning to moderate interest rates and ensuring sustainable economic growth.
Thank you for your attention.