Russian Central Bank Lowers Interest Rate for the First Time in Three Years

The Russian central bank has lowered its key interest rate for the first time in nearly three years, citing easing inflation and growing evidence that high borrowing costs are weighing on economic activity.

The rate was reduced by one percentage point to 20%, in line with expectations from five analysts. One had anticipated a two-point cut, while four others expected the rate to remain at 21%.

In its official statement, the bank said inflationary pressures, including core inflation, continue to decline, and the impact of tight monetary conditions is increasingly visible through weaker demand and subdued pricing trends.

Since last October, the rate had been held steady to counter inflation, which had climbed to more than double the 4% target. However, the pace of price increases has recently begun to slow, prompting calls from ministers and business leaders for policy relaxation to support an economy facing war-related pressures.

Economy Minister Maxim Reshetnikov urged the central bank to ease its stance ahead of the meeting, warning of excessive deceleration in some sectors and calling for action to stimulate growth.

The central bank estimated that annual consumer inflation fell to 6.2% in April (seasonally adjusted), down from 7% in March. Renaissance Capital expects inflation to now be approaching the official 4% target.