Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting on 24 October 2025

Good afternoon. Today, we have made the decision to cut the key rate to 16,5% per annum.

The situation has been developing generally in line with our forecast. Monetary conditions remain tight, fostering disinflation. Therefore, we have made the decision to continue monetary policy easing. At the same time, significant proinflationary risks have materialised since the previous meeting. They are primarily associated with an increase in the budget deficit in 2025 and higher fuel prices. In September, a decline in underlying inflation measures paused. The expected increase in taxes will help bring inflation down over the medium-term horizon, but will also lead to a one-off rise in prices in the short term. We have factored this into our decision, first, by reducing the pace of monetary policy easing, and, second, by revising upward the projected key rate path required to bring inflation back to 4%.

I would now dwell on the reasons behind our today’s decision.

Firstly, inflation.

Current price growth rates were up in September, which was primarily attributed to the dynamics of petrol and vegetable prices. Let me remind you that we observed an unusually early and considerable seasonal decline in fruit and vegetable prices in the summer period. In the autumn, they resumed growth earlier than usual. A change in the seasonal trends in vegetable prices and tightness in the fuel market are temporary factors that have led to an acceleration in current price growth.

However, even if we strip these and other transitory factors from inflation, its underlying measures are still above 4%. They are not demonstrating a sustainable downward trend. Most measures of underlying inflation have remained in the range of 4–6% for several months already.

Inflation expectations stay high. In October, companies’ price expectations even increased after remaining virtually unchanged for several months. They were mostly up in trade. Businesses explain this increase by the expected rise in taxes, among other factors. Households’ inflation expectations remained unchanged in October.

In the updated forecast, the inflation rate projected for the next year has been raised to 4–5%. This is attributed to temporary proinflationary factors, including the situation in the fuel market, the rise in taxes, as well as the indexation of utility tariffs at a higher rate. According to our estimate, these factors will continue to pass through to prices until mid-2026. Underlying inflation will return to 4% in 2026 H2. In 2027 and beyond, annual inflation will remain at the target.

Secondly, the economy.

According to recent data, its growth decelerated in 2025 Q3. Dynamics remain uneven across sectors. Certain industries continue to grow steadily, e.g. pharmaceuticals, food industry, public catering, and tourism. Contrastingly, a number of sectors are registering a decline in output, like metallurgy and coal production.  The situation in those industries is not so much attributed to tight monetary policy effects as to the worsening of the external environment and lower export opportunities. Overall, industries that are mostly focused on domestic demand are performing better.

The expansion of consumer demand sped up somewhat in 2025 Q3. In part, this was associated with the fact that people were buying more cars in anticipation of a rise in the vehicle recycling fee. As for investment demand, we can say that it stays at the high levels it has reached earlier. This is evidenced by business surveys. The situation here is also uneven across sectors and companies.

Last year’s strong economic overheating gradually subsides. This is happening due to more moderate demand dynamics as compared to 2024, coupled with an ongoing expansion of companies’ production capacities. However, certain indicators show that this process still remains unfinished, particularly the indicators of labour market tightness, including historically low unemployment levels and growth of wages outpacing that of labour productivity. Nevertheless, we are registering some signs of an easing in the labour market.

When discussing key rate decisions, we traditionally pay attention to companies’ financial resilience. Their profits are going down, with the process being uneven across sectors, while businesses’ overall financial position remains stable. The Bank of Russia’s regional branches conduct regular surveys of 15,000 enterprises all over Russia. We are recording the worsening of the financial position of small and medium-sized enterprises. This sector is the most vulnerable to cooling demand, rising taxes, and high interest rates. We take into account the situation in the real economy when making key rate decisions.

According to our estimates, the phase of economic overheating will come to an end in 2026 H1. Considering its actual dynamics, we have lowered the GDP growth forecast for 2025 to 0.5–1.0%. Over the next years, GDP growth will accelerate.

Thirdly, monetary conditions.

Overall, they have barely changed, remaining tight. In July–August, interest rates in the economy were going down due to monetary policy easing. By October, this decline had stopped. This was associated with the expectations of a more gradual easing of monetary policy, as well as new fiscal parameters and the reassessment of risks.

Corporate lending growth has sped up in recent months, as compared to 2025 H1. In the updated forecast, we have raised the estimate of the corporate loan portfolio expansion for 2025 to 10–13%. The retail lending forecast has been kept unchanged. Overall, lending to the economy will grow by 8–11% this year. 

The deposit market has, for the most part, completed its adjustment to the key rate decisions made earlier. A number of banks have revised deposit rates upwards, following their substantial decline in the summer. Households’ saving activity generally remains high. This creates prerequisites for disinflation.

Briefly about external conditions.

The global economy continues to slow down, albeit more smoothly than expected. We have made minor adjustments to the forecast of oil prices for 2025 taking into account their actual dynamics. The forecast for subsequent years has been left unchanged.

The ruble has strengthened somewhat since the previous meeting, which may, to a great extent, be attributed to tight monetary policy effects. High interest rates make assets in rubles more attractive than foreign ones. The ruble appreciation has also been driven by one-off factors. In particular, demand for foreign currency has been lower than at the beginning of autumn when some companies were accumulating it to repay loans.

Given these trends, we have kept the forecast of the balance of payments virtually unchanged.

I will now speak of risks.

The ratio of risks is still shifted towards proinflationary ones. Risks associated with inflation expectations persist. There is uncertainty about the extent to which rising prices for petrol, elevated rates of the utility tariff indexation, and increasing taxes will translate into expectations. Although these are one-off factors of price growth, if they lead to an additional rise in inflation expectations, second-round effects on inflation will be stronger.

Current proinflationary risks also include lending growth acceleration at a rate higher than forecast by the Bank of Russia and rising labour shortages. Furthermore, risks to oil prices have increased. The global oil market has shifted to a surplus. This might have a significant impact on prices. For Russia, the situation will be additionally complicated by the sanctions.

There is persisting uncertainty related to geopolitics. Everything will depend on how the situation develops.

Finally, regarding our future decisions.

In recent months, new factors have emerged that will notably impact inflation over the next few quarters. The adjustment of companies, markets, and the entire economy to these factors will take time. So far, the balance of factors requires a higher-than-expected key rate path to ensure a sustainable return of inflation to the target. In the updated forecast, we have raised the key rate range for 2026 to 13–15%, which will make it possible to achieve our 4% inflation target and keep inflation at this level further on.

Thank you for your attention.