The board of the Central Bank of Russia (CBR) at the policy meeting of September 12 resolved to cut the key interest rate by 100 basis points from 18% to 17%, according to the regulator’s press release.

Notably, the CBR remained cautious and defied expectations of a decisive 200bp cut. The regulator headed by the Governor Elvira Nabiullina thus again asserted its independence as the government, the business, and the bankers continue to press for a faster monetary easing.

As followed closely by bne IntelliNews, the CBR cut the key rate by 100bp to 20% in June, making the first monetary easing move in nearly three years.

At the end of July, the CBR resolved to cut the rate by a further 200bp to 18%, as a strong disinflation trend further untied the regulator’s hands in supporting an economy that slid rapidly from overheating to recession.

Although the latest inflation data has been mixed, the market consensus expected another decisive 200bp cut in September, seeing another steep cut is justified by weaker-than-expected economic growth and a faster-than-projected disinflation trend. 

At the end of 2Q25 Russia’s economy narrowly avoided technical recession as war strains mount. The economy contracted in the previous quarter in real terms for the first time as the military Keynesianism boost from heavy military spending had worn off.

However, the CBR opted for a moderate rate cut, noting that inflation expectations remain high and that in recent months, lending growth and consumer demand have even intensified. 

“Pro-inflationary risks still outweigh disinflationary ones in the medium term. The main pro-inflationary risks are associated with a prolonged deviation of the Russian economy above the balanced growth trajectory, elevated inflation expectations, and worsening terms of external trade,” the CBR wrote in the press release.

The CBR also warns that a further slowdown in global economic growth and oil prices amid escalating trade tensions could have pro-inflationary effects via the ruble exchange rate. The regulator also warns that “geopolitical tensions remain a significant source of uncertainty,” and disinflationary risks are linked to a more substantial slowdown in domestic demand.

The regulator also pointed fingers at the government, reminding that it closely watches  “the announced parameters of fiscal policy”. 

While fiscal policy normalisation in 2025 should have had a disinflationary effect, however, this has not yet materialised due to the accumulated budget deficit since the beginning of the year, the CBR notes.

The regulator hinted that if the government wants lower interest rates, it should tame its borrowing and spending appetite. The CBR noted that it will “revise its assessments of fiscal policy effects on inflation after the Government submits amendments to the 2025 budget and new medium-term budget projections to the State Duma”. 

Changes in fiscal policy parameters may require adjustments in the ongoing monetary policy, the CBR warns.

In the meantime, according to the CBR’s forecast, taking into account the ongoing monetary policy, annual inflation will decline to 6%–7% in 2025, return to 4% in 2026, and remain at target thereafter.