The Bank of Russia reduced its key interest rate by 0.5 percentage points to 15.5% per annum at its first board meeting of 2026, according to a press release issued following the decision on February 13.

The regulator said the move reflects the economy’s gradual return to a more balanced growth path. At the same time, it noted that underlying indicators of current price growth have not changed significantly. The central bank expects disinflation to continue once the impact of temporary, one-off factors diminishes.

The Bank of Russia emphasized that future decisions on further rate cuts will depend on the sustainability of the slowdown in inflation and the dynamics of inflation expectations. The regulator will evaluate these factors at its upcoming meetings before determining whether additional monetary easing is warranted.

Updated Rate Outlook Through 2028

The central bank narrowed its forecast corridor for the average key rate through the end of 2026 to 13.5-14.5%, compared to the previous estimate of 13-15%. However, it revised upward its outlook for 2027, projecting an average key rate of 8-9%, instead of the earlier forecast of 7.5-8.5%. The forecast for 2028 remains unchanged at 7.5-8.5%.

In terms of inflation, the regulator expects annual inflation to fall to 4.5-5.5% in 2026. It anticipates that sustainable inflation will approach the 4% target in the second half of the year. From 2027 onward, annual inflation is projected to remain close to target levels.

Economic Growth and Domestic Demand

According to the central bank, the upward deviation of the Russian economy from a balanced growth trajectory is gradually narrowing. Full-year GDP growth in 2025 reached 1%, landing at the upper bound of the October forecast range.

Although overall economic growth slowed during 2025, activity accelerated in the fourth quarter, largely driven by stronger consumer demand. The regulator suggested that this surge may have been partly influenced by expectations of higher VAT and recycling fees. Growth in domestic demand is expected to moderate in the coming months, a trend also reflected in business sentiment indicators.

The labor market is showing signs of easing tightness, the regulator noted. While unemployment remains at historically low levels, wage growth continues to outpace labor productivity gains.

Macroeconomic Forecast and Oil Prices

The Bank of Russia maintained its GDP growth forecast for 2026 at 0.5-1.5%. Projections for 2027 and 2028 were also left unchanged at 1.5-2.5%.

At the same time, the central bank revised downward its forecast for the taxable price of oil. For 2026, the estimate was lowered from $55 to $45 per barrel. The oil price outlook for 2027 was cut from $60 to $50, while the 2028 forecast was reduced from $60 to $55 per barrel.

The updated projections underscore the regulator’s cautious stance as it seeks to balance economic growth with inflation control amid shifting domestic and external conditions.