Russia's Central Bank Sees Only Modest Further Drop in Key Rate — Update

By Paul Hannon

Russia's central bank Friday left its key interest rate unchanged for the second straight meeting, and signaled only a slight decline in borrowing costs next year as inflation is set to remain stubbornly high.

The Bank of Russia's key rate stands at 14%, having been reduced from a mid-2025 high of 21% until the pause at last month's meeting of policymakers. It expects the key rate to average between 12.5% and 13.5% next year, a modest further drop.

"Underlying price growth has not yet decreased," the central bank said in a statement. "This requires aggregate demand to grow moderately for underlying inflation to resume its decline."

The reduction in the key rate in a series of 10 steps reflected an easing of inflationary pressures caused by shortages of workers in parts of the economy as production of military equipment was stepped up and many others were recruited by the army.

But that progress has been halted by Ukraine's attacks on Russian oil refineries and logistics hubs used by large e-commerce companies. The central bank referred to those developments as "a temporary reduction in production capacities in certain sectors."

It said inflation could be higher than it expects if there is "a longer contraction of production capacities in certain industries."

The annual rate of inflation stood at 6.4% in September.

In forecasts published earlier this month, the International Monetary Fund lowered its forecasts for Russian economic growth to 0.9% in both 2026 and 2027 from 1.1% previously.

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

October 23, 2026 07:18 ET (11:18 GMT)