Russian Central Bank maintains descending trend: revised key rate now stands at 18%
Russia's Key Interest Rate Forecast for 2025: Gradual Decline Towards 16%
The Bank of Russia has announced a continued but cautious decline in the key interest rate for 2025, with the rate expected to fall from the current 18% towards the vicinity of 16%. This follows a recent cut of 200 basis points on July 25, 2025, from 20% to 18%.
The decision to lower the key rate was motivated by faster-than-expected declines in inflation and slowing domestic demand. The central bank has signaled further gradual rate cuts throughout 2025 in response to these developments.
In its baseline forecast, the Bank of Russia envisions an average key rate of 18.8–19.6% in 2025, then falling to 12.0–13.0% in 2026. This suggests that monetary policy will stay tight for an extended period to bring inflation down to the 4% target by 2026–2027.
Experts anticipate a key rate reduction to approximately 16% by the end of 2025, contingent on inflation developments and currency risks. This includes a forecast of additional cuts of about 1.5–2 percentage points over coming months after July's 2-point cut.
Governor Nabiullina highlighted that while up to 300 basis points (3%) could be cut in the remaining 3 monetary policy meetings of 2025, the central bank will act cautiously, maintaining tight monetary conditions to ensure inflation continues to slow sustainably. Further cuts are conditional on ongoing inflation declines; if inflation stops falling, cuts may pause.
Inflationary pressure is decreasing faster than previously forecasted. Inflation growth adjusted for seasonality decreased to 4.8% in the second quarter, down from 8.2% in the first quarter (on an annualized basis). If inflation risks re-emerge, the Central Bank can quickly react and take necessary measures.
Banks, anticipating further key rate cuts, have begun to sharply lower deposit rates. The maximum average bank offer in the first decade of July 2025 reached 17.91% per annum, the lowest figure in the last ten months.
As the economy returns to a balanced growth trajectory, the key rate was reduced by 100 basis points for the first time in half a year on June 6. If the current trajectory holds, the key rate may fall to 15% by the end of 2025, as predicted by some experts.
Sources: - Bank of Russia official statement July 25, 2025 - Russia in Review, July 18-25, 2025 - Expert analysis, Izvestia July 21, 2025 - Interview with Central Bank Governor Nabiullina, July 27, 2025 - DK.RU, July 20, 2025
The gradual decline in the key interest rate towards 16% by the end of 2025, as predicted by some experts, might reveal a shift in Russia's banking-and-insurance sector, possibly leading to adjustments in finance-related business decisions. Experts have linked this lowering of the key rate with the slowing domestic demand and faster-than-expected declines in inflation, a trend likely to impact various industries.
