The board of the Central Bank of Russia (CBR) resolved to cut the key interest rate by 50 basis points (bp) from 16% to 15.5% at the first policy meeting of 2026 on February 13, according to a press release from the regulator.

Notably, the CBR defied consensus forecasts and instead of keeping the key rate flat amid a rise in inflation, moved on with the monetary easing cycle that began in June 2025. 

While the CBR managed to curb inflation below 6% in 2025 and made five consecutive interest rate cuts, the regulator was expected to pause the monetary easing and keep the key interest rate unchanged at 16% due to a spike in inflation seen in the beginning of 2026.

According to detailed bne IntelliNews coverage, the analysts previously cited two main reasons for a pause: accelerating inflation due to a VAT hike from 20% to 22% on January 1, and rising inflation expectations among both consumers and businesses. 

However, the CBR dismissed the spike in inflation, commenting that “in January, price growth accelerated significantly under the influence of one off factors”. 

“At the same time, underlying indicators of current price growth,” the CBR argued, with the regulator confident that “after the exhaustion of one off factors, inflation will resume its decline”.

Sustainable inflation will decline to 4% in the second half of 2026, the CBR believes. However, “taking into account the shift of price growth from the end of last year to the beginning of the current year”, the inflation forecast for 2026 has been raised by the CBR to 4.5-5.5%.

The CBR is still confident that its policy target of 4% inflation will be reached in the second half of 2026 and will remain at target in 2027 and thereafter.

The press release also flagged inflation expectations that “remain elevated”, noting that “this may impede a sustained slowdown in inflation”.

“The CBR will assess the expediency of further key rate cuts at upcoming meetings depending on the sustainability of the slowdown in inflation and the dynamics of inflation expectations,” the regulator commented. 

The baseline scenario sees the average key rate in the range of 13.5-14.5% in 2026, which implies maintaining “tight monetary conditions”. 

The CBR seemed to be relieved that the overheating of the Russian economy is over, noting that “the upward deviation of the Russian economy from a balanced growth path is decreasing”. 

“Although overall economic activity slowed over the year as a whole, in 4Q25 it strengthened due to increased consumer demand. This may have been partially linked to expectations of VAT and recycling fee increases. In the coming months, growth in domestic demand will be more restrained. Business sentiment also points to this,” the CBR commented.

Tightness in the labour market is gradually easing, the CBR also argued, noting that latest business surveys also point to companies planning more moderate wage indexation in 2026 compared with 2023-2025. 

“At the same time, unemployment remains at historic lows, and wage growth continues to outpace labour productivity growth,” the CBR warned.

The next CBR board meeting is scheduled for March 20. The CBR warned that pro-inflationary risks “still prevail” over disinflationary risks over the medium term and names high inflation expectations, the effects of VAT and regulated price increases, as well as a deterioration in external trade conditions as the main risks. 

“Geopolitical tensions”, trade wars, and global economic slowdown remain a significant source of uncertainty for the CBR, while disinflationary risks are associated with a more significant slowdown in domestic demand.