Moscow: The Russian Central Bank announced a decision to lower its key interest rate by 50 basis points, bringing it down to 16.5%. This move comes as part of the bank's assessment that the Russian economy is on a path to balanced growth. Market analysts had anticipated that the central bank would maintain the rate at 17% for this meeting.

According to Anadolu Agency, the current rate reduction marks the fourth consecutive cut, positioning the key rate at an 11-month low. Despite a lack of significant changes in underlying measures of current price growth, which remain above 4% in annualized terms, the central bank noted that inflation expectations are still high. The bank emphasized its commitment to maintaining monetary conditions "as tight as necessary" to achieve its inflation target by 2026.

The Bank of Russia forecasts that with its current monetary policy stance, annual inflation will lower to a range of 4.0-5.0% by 2026. One-time pro-inflationary pressures have prompted a revision of the 2026 projection. The bank expects inflation to stabilize at 4% in the latter half of 2026, maintaining this target range through 2027 and beyond.

Historically, the Central Bank of Russia raised its policy rate to 20% in response to the Russian-Ukrainian War. The rate was kept at 16% from late 2023 until July 2024, during which there were four consecutive interest rate hikes. In June, the bank initiated a series of rate reductions, bringing the rate from 21% to 20%, then down to 18% in July, and further decreasing it to 17% in September.