FX.co ★ Russia Holds Interest Rate at Record High

The Bank of Russia maintained its key interest rate at a historic 21% during its March 2025 meeting, aligning with market expectations. The central bank indicated that further monetary tightening is unlikely to be necessary to achieve disinflation. Although inflationary pressures persist due to demand exceeding domestic capacity, the risks promoting inflation have eased since the last assembly. This decision marks a shift from the previously hawkish posture earlier this year, where despite considerations for rate hikes, the Central Bank of Russia (CBR) had kept rates steady. This approach came after Governor Elvira Nabiullina consulted with President Putin and business leaders, who were opposed to elevated borrowing costs. The backdrop for this shift includes a deceleration in inflation expectations, coinciding with a surge in the ruble, which was driven by indications that the United States might resume economic engagements with Russia. A robust ruble has mitigated the pressure from recovering economic growth and historically low unemployment rates. These dynamics unfolded in the context of President Putin’s military mobilization, which prompted an exodus of working-age men.