Moscow: The Russian Central Bank decided Friday to lower its key interest rate by 100 basis points to 20%, marking the first rate cut since September 2022. The key rate currently stands at its 9-month low, as inflation began to ease in Russia.

According to Anadolu Agency, the central bank stated, “Current inflationary pressures, including underlying ones, continue to decline.” This decision comes amidst observations that domestic demand growth continues to outpace the ability to expand the supply of goods and services, signaling a gradual return of the Russian economy to a balanced growth path.

The central bank has committed to maintaining a tight monetary policy until the inflation target is reached in 2026. The bank explained that further decisions on the key rate will depend on the speed and sustainability of the decline in inflation and inflation expectations. The Bank of Russia’s forecast anticipates that, with the current monetary policy stance, annual inflation will return to 4.0% in 2026 and remain at the target.

Following the outbreak of the Russia-Ukraine war, the Russian Central Bank had increased the policy rate to 20%. From the end of 2023 to the end of July 2024, the policy rate was held at 16%, with four consecutive rate hikes occurring in 2024. The last increase was a 200 basis point hike to 21% on October 25, 2024. Although annual inflation in Russia was at 10.2% in April, the bank aims to reduce it to 4%.