A shopping mall in Moscow was painted earlier this year.
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On Friday, the Russian central bank cut its empty interest rates for the first time since September 2022. This is because inflationary pressures are beginning to ease, where inflation pressures are not described as “arring.”
The Bank of Russia fell by 100 basis points to 20%. They were held at 21% since October last year, but they were at the highest level since the new benchmark rate was introduced in 2013.
Seasonally adjusted inflation in April said it had fallen by 6.2% from the average 8.2% in the first quarter of 2025.
“While domestic demand growth still outweighs its ability to expand supply of goods and services, the Russian economy is gradually returning to a balanced growth path,” the central bank said Friday, adding that monetary policy will continue to “long-term” to bring inflation back to its 4% target.
Russia’s full-scale invasion of Ukraine in February 2022 placed a heavy burden on prices, pushing up import prices, and the economy needed to reinforce the rest of the wars that followed.
Russia’s economy minister Maxim Leshchetnikov had urged central banks to cut their rates early in the week as concerns grew over drops in production in various sectors. Russia’s Gross Domestic Product growth recovered strongly after a period of sharp contraction from 2022 to early 2023, but fell from 4.5% at the end of last year to 1.4% in the first quarter of 2025. Meanwhile, economists should note that growth is concentrated in manufacturing, particularly in defense and related industries, supported by state spending.
At the beginning of the year when US President Donald Trump might be able to push Moscow and Kiev into a permanent ceasefire, even deals to end the war have rapidly declined, with direct attacks between the nations continuing.
Nevertheless, Ruble is, so far, the world’s most performant currency to date, due to capital management, tighter policy and a decline in the US dollar. Greenback was 2.72% higher against the ruble on Friday, following the announcement of interest rate cuts.
Nicholas Far, an emerging European economist in capital economics, said the cut to 20% was a tremendous surprise to the market, a deeper cut than expected, with the forecast rate ending at 17% from the previous estimate of 18%.
“That being said, the imbalance in demand supply from the war suggests that interest rates need to remain in restrictive territory,” Farr added.
US Dollar/Russian Ruble.
– Contributors from CNBC’s Lee Ying Shan and Holly Ellyatt.
