Russia’s Central Bank has kept its key interest rate unchanged at 21 percent in a move that signals caution as inflationary pressures continue to rise. This marks the second consecutive time the bank has held the rate steady since its increase to 21 percent in October. Policymakers cited persistent inflation risks, stating that the economic outlook remains uncertain.
The bank revised its inflation forecast for 2025, raising it from an earlier estimate of between 4.5 and 5 percent to between 7 and 8 percent. Officials now expect inflation to return to the 4 percent target only in 2026. The Russian economy has struggled with fluctuating prices since the full-scale invasion of Ukraine in 2022, leading to severe Western sanctions and increasing economic instability. A major factor in rising inflation has been soaring defence spending, as Moscow continues to prioritise arms production for the war.
Annual inflation stood at 10 percent as of 10 February, following a minor decrease between December and January. The Central Bank stated that future interest rate decisions would depend on how quickly and consistently inflation declines. The regulator warned that bringing inflation back to the target level would take longer than previously anticipated.
Unlike in December, when markets expected a rate increase of 1 to 2 percent, analysts were not surprised by the decision to maintain the current rate. Some experts believe the move suggests that Russia’s authorities are willing to tolerate higher inflation this year. Chief Economist at T-Investments Sofia Donets said that the Central Bank’s decision could be interpreted as a softer stance than expected, though she noted that further rate hikes remain possible. She explained that policymakers are trying to prevent markets from lowering long-term rates too quickly.
Following the announcement, the Moscow Exchange index rose by 0.86 percent, while the ruble traded at 91 against the dollar. The Central Bank’s next rate decision is scheduled for 21 March.
