Russian central bank keeps key rate at 14%

The Bank of Russia kept its key interest rate unchanged at 14% per annum on Friday, citing elevated price pressures and persistently high inflation expectations, Anadolu Agency reported.

In a policy statement, the central bank said the Russian economy was growing at a moderate pace in the second half of 2026, but underlying price growth had yet to ease and remained between 5% and 6% in annualized terms.

The bank linked the trend mainly to a temporary reduction in production capacity in some sectors. It said aggregate demand needed to grow moderately for underlying inflation to resume declining.

Seasonally adjusted price growth averaged 8% in annualized terms in the third quarter of 2026, up from 4.8% in the second quarter, according to the bank’s estimates. Core inflation rose to 6.2% from 4.5% over the same period, partly because of volatile components such as motor fuel.

Annual inflation in Russia stood at 6.8% in October and is projected to end 2026 between 7.1% and 7.6%. Under its baseline scenario, the bank expects the key rate to average between 12.5% and 13.5% in 2027, with annual inflation returning to its 4% target next year.

The central bank said medium-term risks remained tilted towards higher inflation. These include supply-demand imbalances, prolonged reductions in production capacity, geopolitical tensions and wage growth continuing to outpace labour productivity. Labour market tightness is gradually easing, while unemployment remains near historic lows.

Consumer demand growth is slowing, but lending activity remained elevated in the third quarter, driven largely by corporate borrowers, the statement said.

The Bank of Russia had gradually cut its policy rate from 21% to 14% through a series of reductions that began in June 2025.