“We considered three options: keeping the rate unchanged, lowering it by 0.5 percentage points and lowering it by 1 percentage point.” – said the head of the Russian central bank, Elvira Nabiullina, quoted by Reuters.
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Interest rates in Russia are going down
Ultimately, interest rates in Russia fell by 0.5 percentage points on Friday. This is twice as severe a cut as the one that took place in December at the NBP. However, there is a key difference. In our country, the main interest rate, which affects e.g. loan installments, is 4%. In Russia it is as much as 16 percent.
“As the economy has been volatile in recent months, it is difficult to assess its stability based on just one month. Given the inflationary factors that are expected to materialize in the near future, including VAT and tariff increases, there has also been a significant acceleration in lending and persistently high inflation expectations,” commented Elvira Nabiullina.
“Those who proposed a larger step believed that the current slowdown in inflation was already quite sustainable. However, in these circumstances the majority still believed that a more balanced and cautious decision was needed about reducing the rate by 0.5 percentage points,” added the head of the Russian bank.
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Interest rates down. Bank of Russia on inflation
“I can say with certainty that we have come a good part of the way, but the second half, as we know, is always more difficult. One month of low inflation is clearly not enough. And that, by the way, is why we are looking and paying more attention not only to monthly inflation, but to three months of seasonally adjusted, rolling inflation. Over the last three months, it has averaged 5.2 percent. This is above our target. Add to that inflation expectations, and you will understand why we are so cautious in lowering rates. We see that We will reach neutral in 2027.” she pointed out.
The Bank of Russia predicts that some increase in inflation is possible in January due to the VAT increase. However, he believes that after this increase, inflation will continue to decline, and in the second half of the year the components of sustainable inflation will fall to around 4%.
