Summary of the Key Rate Discussion released

The main topic of discussion was accelerated price growth over recent months, driven by higher fuel prices and their impact on inflation expectations. Most participants believed that underlying inflation would not rise considerably, while predicting that inflation would be higher this year than assumed in the April forecast.

In 2026 H1, economic activity expanded moderately. Consumption growth sped up, but more data are needed to make sure that this process is sustainable. A contraction in production capacities was restraining output. According to most discussants, the consequences of the decline in production capacities will be transitory. Import expansion and redistribution of domestic supplies will limit their influence on economic activity.

As for fiscal policy, given that the Government has not announced its updated medium-term parameters yet, the Bank of Russia prepared its forecast based on its own estimate of the path of the structural primary deficit towards zero by 2029, while taking into account public statements by the Government.

Following the discussion, the Bank of Russia Board of Directors decided to cut the key rate by 25 bp to 14.00% per annum. The Bank of Russia will make further key rate decisions based on the dynamics of inflation and inflation expectations, and the assessment of risks posed by domestic and external conditions.

Considering the materialised proinflationary risks, the regulator now has less room for a further key rate reduction and therefore has raised the forecast range of the average key rate for the next three years. Given the monetary policy pursued, annual inflation will return to the target in 2027 and stay close to 4% further on. From 2027 onwards, the economy will be growing steadily at a pace of 1.5–2.5% per year.

More details on the economic outlook are available in the Commentary on the Bank of Russia’s Medium-term Forecast.