The Bank of Russia lowered its benchmark interest rate by 50 bps to 15.5% at its first policy meeting of 2026, defying the median market expectation of an unchanged rate, in an effort to support economic growth. The CBR moved ahead with the cut despite a recent reacceleration in consumer prices, emphasizing that the latest price pressures mainly reflect one-off factors and that the disinflation trend is likely to persist over the course of the year.
The central bank also indicated it has not observed a significant pass-through from the new VAT measures to a broad range of consumer goods and services, easing earlier worries that higher taxes would substantially fuel inflation. At the same time, the CBR noted that economic growth weakened in the fourth quarter and that labor market tightness is gradually easing.
Furthermore, the combination of elevated real interest rates, a strong ruble, and high yields on long-dated OFZ government bonds has kept overall financial conditions restrictive, reinforcing the case for a reduction in policy rates.
