Russian Central Bank Holds Key Interest Rate Steady

MOSCOW: Russia’s monetary authority announced on Friday that it would keep its benchmark interest rate unchanged at 21%. This decision comes as inflation shows initial signs of slowing down, but the Russian economy faces emerging challenges due to global economic instability intensified by U.S. trade tariffs.

The central bank stated that a potential slowdown in global economic growth and declining oil prices, driven by increasing trade tensions, could exert upward pressure on inflation through fluctuations in the ruble’s exchange rate.

This determination aligned with the consensus from a survey of 25 analysts conducted .

To combat inflation, the central bank is maintaining its key rate at its highest level since the early 2000s. The ruble’s appreciation of 37% against the dollar this year has supported this effort by lowering the cost of imported goods.

The regulator commented that existing inflationary pressures, including underlying ones, are still declining, although they remain elevated. The 2025 inflation outlook was held steady at 7.0–8.0%, with expectations that inflation will return to the 4.0% target in 2026.

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The regulator also suggested that additional rate increases may be necessary, projecting an average key rate of 19.5–21.5% in 2025, compared to the previous estimate of 19-22%.

Despite sanctions, the Russian economy has outperformed expectations during the three years of the conflict in Ukraine. However, the nation is now bracing for a sustained period of reduced oil prices and declining budget revenues.

According to Natalya Orlova of Alfa Bank, this choice indicates that the central bank is fostering stable economic conditions to mitigate uncertainties related to trade conflicts and oil price volatility.

The central bank observed a deceleration in economic activity during the first quarter of 2025, compared to the fourth quarter of 2024. The percentage of businesses reporting labor shortages is also decreasing.

The central bank reaffirmed its 2025 growth forecast of 1-2%, which is lower than the government’s projection of 2.5%. The next policy meeting is scheduled for June 6.