Russia cuts key interest rate to 14.5%, says inflation risks remain

Russia’s central bank lowered its key interest rate by 50 basis points to 14.5% on Friday, while maintaining a cautious tone on inflation and future policy decisions.

The Bank of Russia said in a statement that “measures of underlying price growth have not yet decreased,” adding that uncertainty remains significant regarding the external environment and fiscal policy parameters.

The bank said it would consider the need for further key rate reductions at its upcoming meetings, depending on the stability of the slowdown in inflation and inflation expectations.

“In case of higher expenditures accompanied by growth in structural budget deficit, tighter monetary policy will be required than that under the baseline scenario,” the central bank said.

The decision marked another step in the bank’s monetary easing cycle, but the statement signaled that policymakers remain concerned about persistent inflationary pressures and possible risks from government spending.

Russia’s inflation slowed to 5.77% in April from 5.9% in March, while inflation expectations declined to 12.9% from 13.4% a month earlier, according to official weekly data.

The Bank of Russia said annual inflation is expected to decline to 4.5%-5.5% in 2026.

The rate cut comes as Russia’s economy shows signs of weakening following a prolonged period of tight monetary policy. Gross domestic product fell by a combined 1.8% in January and February, according to earlier remarks by President Vladimir Putin.

The central bank has said the recent slowdown reflects a cooling of economic activity, while keeping its focus on bringing inflation down.