The decision taken by the Central Bank of Russia, even while Putin was holding the marathon conference / How he answered when asked why food prices are rising and wages are not
People buying food in a hypermarket in Moscow, Russia, on November 3, 2023. PHOTO: AP / AP / Profimedia
Russia's central bank cut its benchmark interest rate by 50 basis points to 16% on Friday, in line with analysts' expectations, amid slowing inflation and challenges to economic growth amid military action in Ukraine, Reuters reports.
The central bank made the announcement as President Vladimir Putin held his annual press conference, where he said the economic slowdown was the result of the central bank's tightening of monetary policy to reduce the rate of inflation.
“The measures underpinning the current price increase eased in November. However, inflation expectations have risen slightly in recent months,” the central bank said in a statement.
The institution said that after an expected rise in inflation in early 2026 due to tax increases, the inflation rate will continue to fall until reaching the 4% target in 2027. The bank said that “geopolitical factors” remain an uncertainty.
Central bank governor Elvira Nabiullina said it was too early to declare victory over inflation, adding that “any marathoner knows that the second half of the race is more difficult than the first.”
“One month of low inflation is not enough,” she added. The Russian ruble, which has been supported by high interest rates and falling imports this year, appreciated 0.8 percent against the U.S. dollar and 0.5 percent against the Chinese yuan on Friday.
Putin says Central Bank is acting 'very responsibly'
Most analysts polled by Reuters had expected the central bank to cut the benchmark interest rate by 50 basis points to 16 percent, but some revised their forecasts to a bigger cut in light of Putin's marathon conference.
“For the market, this decision is negative, with many hoping for a broader move,” said economist Evgeny Kogan. Economists and business leaders say a rate of 12 percent or 13 percent is needed to spur economic growth, up from 1 percent currently.
The central bank board meeting, which had been planned well in advance, coincidentally took place during Putin's annual conference. Reacting to the interest rate announcement, Putin said he did not intervene in the decision-making process.
“The central bank works independently. I try not to interfere in the decisions it makes and I try to protect it from any external influence and pressure. Overall, the central bank not only copes with the situation, but acts responsibly,” Putin said.
Many Russians do not trust the numbers, conference moderators said
Putin estimated that inflation could fall to 5.6 percent in 2025, from 9.5 percent last year. The central bank estimated inflation at 5.8% on December 15. However, the moderators of the conference said that questions received from viewers indicated that many Russians did not trust the numbers.
They cited a question from Maxim Volkov, a citizen of the Samara region, who said his monthly salary of 50,000 rubles ($621) was not enough to feed his family of three children. Volkov said the price of poultry meat has doubled this year.
Moderators also cited a message from a child from the southern Rostov region, who was not named, who asked: “Why are the prices of food and buns in canteens increasing, but my parents' wages are not?”
Putin said inflation data showed average figures, while prices for some foods could rise faster.
“It depends on the food basket that a person consumes. If this food basket mainly contains protein products, such as meat, chicken, then of course this affects the family budget. And there is certainly nothing good in this,” the Kremlin leader added.
