Russian central bank delivers surprise rate cut, first since 2022

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MOSCOW: The Russian Central Bank on Friday reduced its key interest rate to 20 %, an amazing move by the bank, which justified inflation pressure and a stronger ruble.

This was the first ease by the bank since September 2022, which has faced pressure from business leaders and top government officials to reduce the rates. In a statement, the bank said that economic growth was cooling down and inflation was decreasing.

“The current inflation pressure, including the main people, is declining,” he said, while the increase in domestic demand is eliminating capabilities to increase the supply of goods and services, the Russian economy is slowly returning to a balanced growth. “

At a press conference after the verdict, Governor Elvira Nabulina rejected a suggestion that the regulator had shown political pressure to reduce the rates. A Reuters survey predicted that the central bank would maintain a key rate. 21 % had passed since October to stop inflation in the highly summer economy, which focuses on military fighting needs in Ukraine.

“The Bank of Russia promoted us Adrenaline today,” said Tafia Donates, chief economist at T -Bank. “We’re going through a long -standing turning point in a long, expansion cycle of tightening policy.”

If inflation begins to rise again, Nabulina has not rejected the future rate. He said that the board considered half and one full percentage point powers in the meeting. Russia’s economic growth rate was 1.5 percent year -on -year in the first four months of 2025, while compared to 4.3 percent last year, Nabulina led to severe criticism.

The effect of the ruble definition

Since the beginning of the year, consumer prices have increased by 3.39 %, while the same period of the same period of last year compared to 3.88 %, while the annual inflation rate has decreased by 10 % after 10.34 % in March.

The central bank predicts inflation this year that this year, 7.0 percent to 8.0 percent and economic growth is 1.0 percent to 2.0 percent. The Ministry of Economy is more hopeful, which is predicted by 2.5 %.

Since the beginning of the year, the strength of the ruble, which has increased by about 40 % against the dollar, has helped the central bank in its fight against inflation by making import goods cheap.

Its rise is attributed by many analysts and businessmen to US President Donald Trump’s efforts to bring Russia and Ukraine to the negotiating table. Most analysts agree that without a sign of negotiations, the ruble is waiting for a trigger to collapse.

Nabulina said that high interest rates, which helped suck people’s savings in banks reserves, was an important factor behind the strength of the ruble. “Now we have more confidence in the stability of the exchange rate dynamics than April,” he said.

On Friday, the ruble was 2.6 % lower than the US dollar. The central bank has warned that global economic slowdown and oil prices reduction can increase inflation once again through a weak ruble.

Food inflation is high

Despite the deduction, the inflation background remains focused. An important gauge supervised by the central bank, among the families, increased in May to the second consecutive month, in which some analysts linked to the nationwide planning of electricity, gas, water and sectarian services across the country.

Food inflation, which, with potato prices, has increased threefold in the last year due to poor crop, has severely affected the poor of Russia. The central bank said in its statement that food inflation is high.

“This year, the approach to harvesting is better,” said Deputy Governor Alexei Zubotkin said, it is important to understand that the crop does not need to break the record. It does not need to be worse than the previous year to ensure the excessive dynamic in food prices. “