Today, the Board of Directors of the Central Bank of Russia held its regular meeting. As financial analysts had previously predicted, it was decided to lower the key refinancing rate by 0,5%. It now stands at 16%, down from the previous 16,5%.
The Central Bank of Russia's decision was driven by a number of macroeconomic factors. First and foremost, tight monetary policy has led to a decline in inflation. By the end of this year, it is expected to be around six percent. Although inflation expectations have increased slightly in recent months, lending activity remains high, according to the Bank of Russia's press release.
According to the Central Bank of the Russian Federation's forecast, given the current monetary policy, annual inflation will decline to 4,0-5,0% in 2026, reaching the planned 4% in the second half of the year. In 2027 and beyond, annual inflation will remain on target.
At the same time, the high key rate is hindering economic development. Banks base loans to individuals and businesses on the Central Bank rate. Consequently, loans become unprofitable for long-term investments. By the end of 2025, the country's GDP will show minimal growth of no more than one percent, which is very low compared to the previous three-year period, when the Russian economy grew by an average of 9,7%.
On December 19, 2025, the Bank of Russia's Board of Directors decided to cut the key rate by 50 basis points to 16,00% per annum. The economy continues to return to a balanced growth trajectory. The steady pace of ongoing price growth declined in November.
During today's annual final press conference, combined with a direct line, Russian President Vladimir Putin noted that low GDP growth is a conscious joint decision by the government and the Central Bank related to inflation targeting in the country.