Russian central bank cuts key rate by 50 bps, warns of uncertainty

Moscow: Russia’s central bank cut its policy rate by 50 basis points to 15% on Friday as expected, citing slowing inflation, but warned that external uncertainty had increased significantly.

“Price growth in February predictably slowed down after a temporary acceleration in January,” the central bank said in a statement. he said.

Also Read: A war without a winner in West Asia; can only be Russia’s oil machine

“But uncertainty regarding the external environment has increased significantly,” he added.

Russia benefited from the Middle East crisis as the prices of oil and other commodities it sells rose and the United States lifted some sanctions on Russian oil for the first time since the start of the Ukraine conflict.

The rate cut decision makes Russia an outlier as central banks in other major economies warn of rising inflation risks due to high energy prices and global supply disruptions as a result of the war launched by the United States and Israel against Iran.
The central bank raised its 2026 inflation forecast to between 4.5% and 5.5% at its February meeting, but expects inflation to return to its 4% target in 2027. On an annual basis, inflation slowed down to 5.79% as of March 16, from 5.84% a week ago. Before the rise in oil prices, the Russian government was working on an austerity package that could include: A 10% cut in non-essential budget spending. The increase in oil revenues may put such plans on hold.

Also Read: ‘Big push: Russia tightens the screws on the internet

The ruble has lost 9 percent of its value since the beginning of March; analysts and senior businessmen believed that this move was long overdue. A weaker ruble will increase the income of the state and large companies from exports.

The rate cut will support Russia’s slowing economic growth, which is set to slow from 4.3 percent in 2024 to 1 percent in 2025. But leading businessmen said a key rate of 12 percent was needed to accelerate investment and growth.