Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting on 19 June 2026
Good afternoon. Today, we have made the decision to cut the key rate to 14.25% per annum.
As we expected, business activity indicators improved slightly in April–May, after weak dynamics at the beginning of the year. Current price growth has slowed down, largely on account of one-off factors. Measures of underlying inflation have edged down as well, owing to the accumulated effect of tight monetary policy and the narrowing gap between demand and supply potential. However, proinflationary risks have increased significantly. Over the next three years, fiscal policy will be more expansionary than is assumed in the Bank of Russia’s baseline scenario. Lending growth has accelerated notably in recent months. This can limit the room for a further key rate reduction, which has required us to take a more cautious decision today.
I will now explain the reasons behind our today’s decision.
Firstly, inflation.
Current price growth rates have declined considerably in recent months, mainly under the influence of one-off factors. For example, spring saw fruit and vegetable prices decrease faster than usual. The ruble appreciation over recent months against the background of high prices for key Russian exports has also contributed to the price growth slowdown.
Nevertheless, underlying inflation is a more important factor in our decisions. It has decelerated as well, albeit less notably, and remains within the range of 4–5% in annualised terms, according to our estimates.
As regards inflation expectations, they have decreased among both businesses and households, but stay elevated.
The inflation rate in June will be affected by the spike in fuel prices that has occurred. The Russian Government takes the necessary measures, but it might take some time for supply to rebound. Higher prices for petrol may also influence inflation expectations, as this product is fairly important for both people and businesses. Besides, in recent weeks, the dynamics of vegetable prices have reversed after their unusually strong decline during the spring months. This is already evidenced by high-frequency data.
Bringing the topic of inflation to a close, I would like to highlight the statistical effect that will impact annual inflation measures over the next few months. Housing and utility rates will not be raised in July as they were last year. In 2026, their indexation was rescheduled for October, which means that annual inflation might edge down temporarily due to this factor. However, this will only be an intra-year redistribution of price growth.
Secondly, the economy.
According to high-frequency data, in 2026 Q2, indicators of economic activity are improving, as expected. Temporary factors that were constraining it in early 2026, including calendar and weather effects, have been exhausted or have reversed. Specifically, there is a slight rebound in construction, which was the main contributor to the GDP decline in 2026 Q1 due to a cold and snowy winter. When analysed as a whole over 2026 H1, economic dynamics can be characterised as moderate growth in the output of goods and services.
However, the situation varies greatly across industries, and this heterogeneity has increased in the past year. The above is largely associated with the structural transformation of the economy. While government demand growth is accelerating notably, the room for private – investment and consumer – demand growth is decreasing, given limited resources. The increase in sectoral heterogeneity is also driven by more short-term factors, such as the situation in global commodity markets and temporary disruptions in the operation of certain production facilities.
As for consumer activity, it has continued to grow moderately. Car purchases were on the rise in the spring months. Demand in the services segment remains high.
Consumption is supported by wage growth, although the latter has somewhat decelerated, with enterprises planning more modest indexations in the future. In addition, wage dynamics are highly diverse across industries and types of activity, reflecting the heterogeneity in the economy that I have already mentioned.
Overall, tightness in the labour market is easing slowly. According to Bank of Russia regional branches, labour shortages have stopped to ease in a number of regions over recent months. In this context, a sustainable decrease in cost and price pressures requires a further narrowing of the gap between growth rates of wages and labour productivity. Moreover, I would like to emphasise that to boost labour productivity, it is critical that the workforce is utilised to the maximum extent in the sectors where it delivers the greatest economic benefit.
Thirdly, monetary conditions.
Interest rates in most financial market segments have continued to decline smoothly under the influence of monetary policy decisions made earlier. Contrastingly, longer-term OFZ yields have risen slightly. This is associated with the increase in the term premium, driven by uncertainty regarding fiscal policy.
I would like to note that most corporate loans, especially to large and medium-sized companies, are currently granted at floating interest rates. For such loans, a key rate reduction translates, immediately and fully, into a decrease in interest payments not only on new loans, but also on existing ones.
The saving ratio stays rather high, albeit edging down. Households’ ruble funds with banks continue rising. Among banking products, demand for savings accounts is growing. People are also increasingly interested in investing in financial market and non-financial instruments.
April–May saw lending growth speed up notably. In the retail segment, there was an uptick in unsecured and car loans, as well as in market-based mortgages. Corporate lending growth rates have increased considerably.
Currently, the dynamics of monetary indicators requires our special attention. First, if accelerated lending growth becomes a persistent trend, rather than a short-term spike after low levels at the beginning of the year, this might mean that current monetary conditions are no longer perceived as restrictive by borrowers.
Second, the contribution of fiscal policy to the increase in money supply remains elevated and, in case of the budget parameters revision, will be greater than we assumed before. In this context, if lending continues growing at such high rates, we might be required to pursue tighter monetary policy than expected in the baseline scenario. The total effect via the fiscal and credit channels has already caused the increase in money supply to nudge the upper bound of the expected range and even exceed it slightly. Taking into account certain time lags of our decisions’ impact on the economy, the above already requires a more restrictive monetary policy stance than assumed in our April forecast.
Now, I would like to speak of external conditions.
The situation in the Middle East has pushed up commodity prices. These changes have already started to translate into inflation acceleration in many countries. A number of central banks have responded to the increase in proinflationary risks by raising their policy rates. Concurrently, expectations regarding global economic growth are declining.
For the Russian economy, disinflationary effects have been predominating so far. Namely, higher prices for commodities have pushed up export revenues and led to the ruble appreciation. Demand for imports has risen as well, albeit less notably than the value of exports.
Risks of a prolonged Middle East conflict have declined. However, there is still uncertainty regarding the scale of its proinflationary consequences for the world economy, which might affect the Russian economy via imports prices and logistics costs.
I will now speak of the overall risks.
According to our estimates, the balance of risks has shifted towards proinflationary ones even more. As regards the risk related to the revision of fiscal policy parameters, we can say that it is essentially already materialising. However, its scale remains uncertain. Both fiscal and monetary policies affect demand in the economy. When the contribution of fiscal policy rises to meet the priority objectives, monetary policy should act as a stabiliser. Its tightness should change accordingly to somewhat reduce the contribution of credit to aggregate demand. This is the only way to avoid an upward deviation of demand from output potential and, consequently, another inflation surge.
Risks associated with labour shortages and inflation expectations persist. Proinflationary risks stemming from a temporary decrease in supply have risen in certain industries. As regards risks related to the external environment, I have already mentioned them.
Weaker dynamics of domestic demand, as compared to our baseline estimates, remain a disinflationary risk.
Winding up, I would like to comment on our future decisions.
Current price growth rates have declined significantly, but we are seeing a rise in the risks that might lead to inflation acceleration in the future. Those that can have a lasting effect on demand and prices in the medium term are particularly significant to us. Monetary policy influences the economy and prices with certain time lags. Therefore, our decisions should be forward-looking.
I would like to emphasise that neither a further key rate cut nor the size of it is predetermined at any particular meeting. We might need to take pauses to analyse all incoming information and the effect of our earlier decisions. It is only by maintaining a balanced approach, especially amid high uncertainty, that we can achieve a sustainable result and stabilise inflation at a low level.
Thank you for your attention.