The Russian central bank has cut its main interest rate by 2% ( 200 basis points), bringing it down to 18%. This move was expected by many economists and is meant to make borrowing cheaper so that businesses and people take more loans, spend more, and boost the economy especially since economic growth is likely to slow down this year.
The central bank also said that inflation (the rise in prices) is slowing down faster than expected. Also, people and businesses in the country are spending less, which reduces demand for goods and services. Because of these two reasons i.e. lower inflation and weaker demand within the country, the central bank has lowered its inflation forecast for 2025.
Russian Central Bank Forecast For 2025 – The central bank now expects inflation in 2025 to be between 6% and 7% while earlier, it was expected to be 7%–8%. It kept its economic growth forecast unchanged at 1%–2% for 2025. Last year, in 2024, the economy grew by 4.3%, which was unusually high.
Last year, the central bank had raised interest rates a lot (to levels not seen since early 2000s) to fight high inflation. But business leaders were unhappy, saying high rates made it hard to invest. President Putin supported the central bank’s strict policy but warned them not to hurt the economy too much.
Earlier this year, Russia’s currency the rouble, got stronger partly because of the high interest rate. But now that a rate cut was expected, the rouble has started falling again, reaching around 80 per U.S. dollar. After a phase of strict measures, Russia’s central bank is now softening its approach..They believe the economy is stabilizing, inflation is cooling, and growth is returning to a more balanced pace.
