Russian Central Bank Lowers Key Rate to 16.5% in Fourth Consecutive Reduction

Central Bank Continues Rate Easing Cycle

The Central Bank of the Russian Federation (CBR) announced on Friday, October 24, 2025, a reduction in its key interest rate by 50 basis points, bringing the rate down to 16.5% from its previous level of 17%. This decision marks the fourth consecutive rate cut since the bank began easing its monetary policy in June from a peak of 21%.

The move comes as the Russian economy continues to navigate a complex landscape of persistent inflationary pressures and a decelerating growth trajectory. The CBR's Board of Directors stated that the economy is 'returning to a balanced growth path' and noted an acceleration in lending growth in recent months.

Monetary Policy Amidst Inflationary Pressures

Despite the series of rate cuts, the Central Bank reiterated its commitment to maintaining 'tight monetary conditions as necessary' to guide inflation back to its 4% target. Annual inflation stood at 8% in September 2025 and 8.2% as of October 20, remaining significantly above the target. The bank now projects annual inflation to be between 6.5% and 7% by the end of 2025, easing to 4%-5% in 2026, with the 4% target expected to be reached in the second half of 2026 or by 2027.

Governor Elvira Nabiullina acknowledged that 'underlying measures of current price growth have not changed significantly and remain above 4% in annualised terms,' and that 'inflation expectations remain high.' She also noted that demand growth is slowing and 'demand overheating is subsiding,' with tensions in the labor market easing slightly.

Economic Outlook and External Factors

The rate cut occurs against a backdrop of revised economic forecasts and new external challenges. The CBR has lowered its 2025 GDP growth forecast to a range of 0.5%-1.0%, down from its July projection of 1.0%-2.0%. Similarly, the International Monetary Fund (IMF) recently reduced its forecast for Russia's 2025 economic growth to just 0.6%.

New sanctions from the United States, targeting major oil companies like Lukoil and Rosneft, and a nineteenth round of EU sanctions, were announced shortly before the rate decision. Governor Nabiullina described these sanctions as a 'negative external factor' but expressed confidence in the economy's ability to adapt.

Looking ahead, the Central Bank anticipates a temporary increase in inflationary pressure in late 2025 and early 2026 due to several factors, including price adjustments and the expected impact of a planned increase in the Value Added Tax (VAT) to 22% from 20%. The next key rate decision is scheduled for December 19.