Russia’s central bank reduced its interest rates for the first time since September 2022, cutting the benchmark rate from 21% to 20%. The decision comes as inflation eases and economic growth slows, following intense pressure from Russia’s war in Ukraine.
The move was seen as a surprise by the market, with the ruble dropping against the US dollar. This is attributed to capital controls, policy tightening, and a decline in the US dollar. Despite this, the ruble remains the world’s best-performing currency so far this year.
Economists forecast that interest rates will remain high, but at a lower level than previously expected. The central bank said monetary policy would remain tight to return inflation to its 4% target. Growth has been concentrated in manufacturing, specifically in defense and related industries, supported by state spending.
The cut in interest rates is a sign that inflation pressures are beginning to ease, with seasonally-adjusted inflation in April at 6.2%, down from an average of 8.2% across the first quarter of 2025. However, demand-supply imbalances from the war suggest interest rates will need to stay restrictive for a long period.
Source: https://www.cnbc.com/2025/06/06/russia-cuts-sky-high-interest-rates-for-the-first-time-since-2022.html