Russia's Central Bank Decides to Keep Key Interest Rate at 21%

Russia's Central Bank decided to keep its key interest rate at 21% on Friday, surprising analysts who had anticipated an increase of one or two percentage points to tackle rising inflation.

The Bank said that the increase in borrowing costs and the cooling of credit activity has “created the necessary prerequisites for resuming disinflation processes and returning inflation to the target,” The Caspian Post reports, citing The Moscow Times.

While inflation remains elevated, the bank expressed confidence that, with its current monetary policy stance, “annual inflation will decline to 4% in 2026 and stay at the target further on.”

However, the Central Bank acknowledged that inflationary pressures persist, partly due to the ruble’s depreciation, with annual inflation rising to 9.5% as of mid-December. Despite this, the bank indicated it would continue to evaluate the need for a rate hike, with future decisions based on “lending and inflation dynamics.”

Those conditions, which include a notable rise in borrowing costs and a slowdown in credit activity, are seen as laying the groundwork for disinflation and a return to the inflation target, the bank said.

Central Bank Governor Elvira Nabiullina said at a press conference later on Friday that the economy was starting to see “tight monetary and credit conditions that should ensure the slowing of inflation in the coming quarters... Therefore, we paused raising the key interest rate.”