Russia's central bank sees 14-16% rates in 2027 if inflation risks bite
The Bank of Russia would keep its key rate at an average 14-16% in 2027 if inflation risks materialise, a percentage point higher than in September, its final policy guidelines show.
The board approved the final version of the report, the Main Directions of the Single State Monetary Policy for 2027 and 2028-2029, on October 28. In the draft published in September, the pro-inflationary scenario implied an average rate of 13-15% in 2027 and 11-12% in 2028.
The tougher path follows a third quarter in which fuel price spikes caused by temporary losses of production capacity pushed underlying inflation back up to 5-6% on an annualised basis and forced the regulator to stop easing at 14% in September and October. Governor Elvira Nabiullina has already signalled less room for rate cuts next year.
The baseline, unchanged from the forecast released with the October 23 decision, has inflation ending 2026 at 7.1-7.6% and returning to the 4% target in 2027. The average key rate is 14.6% this year and 12.5-13.5% in 2027, returning to the 7.5-8.5% neutral range in 2029. GDP grows 0.5-1.0% in 2026, 1.0-2.0% in 2027 and 1.5-2.5% in 2028-2029. The Urals price used for tax purposes is put at about $72 a barrel this year, falling to $50/b.
| Scenario, 2027 | Average key rate | Inflation, Dec/Dec | GDP growth |
| Baseline | 12.5-13.5% | 4% | 1.0-2.0% |
| Disinflationary | 10-12% | n/a | 2.0-3.0% |
| Pro-inflationary | 14-16% | 4.5-5.5% | 0.5-1.5% |
| Risk (global crisis) | 19-21% | 11-13% | -3.0 to -4.0% |
The pro-inflationary scenario, which the bank considers more likely than the disinflationary one, combines stronger demand with weaker supply: a bigger fiscal contribution, tighter sanctions, a slower restoration of damaged production capacity, more protectionist measures and inflation expectations that react more strongly to past price rises.
Inflation would reach 4.5-5.5% in 2027 and growth would slow to 0.5-1.5% in 2027-2028. The rate would fall to 11.5-12.5% in 2028 and 8.5-9.5% in 2029, as the neutral rate would also be higher, and Russia's reserves would shrink in 2028-2029.
The risk scenario, whose probability the bank rates as low, models a global financial crisis on the scale of 2007-2008. The regulator names a possible trigger: a sharp repricing of technology company assets on inflated expectations of the economic gains from artificial intelligence. Oil prices would drop, the budget rule's base oil price would be cut to $45 a barrel in 2027 and $35/b from 2028, GDP would shrink by 3-4% in 2027 and 1.5-2.5% in 2028, and inflation would jump to 11-13% in the first crisis year. The key rate would average 19-21% in 2027 and 14-16% in 2028, and would still be 9.5-10.5% in 2029.
AI also drives the upside case. In the disinflationary scenario, better allocation of resources and the spread of new technologies including AI lift productivity, letting the economy grow by 2-3% in 2027 and 2028 without extra inflation and the rate fall to an average 10-12% in 2027 and to the neutral range in 2028.
Fiscal policy is assumed to tighten in every scenario. The baseline relies on new budget plans that cut the structural primary deficit from 1.8% of GDP in 2026 to 0.6% in 2027 and 0.2% in 2028, reaching zero in 2029, with the base oil price in the budget rule lowered to $50 a barrel from 2027.
The bank also said it began a regular review of its monetary policy regime in 2026, due to end in 2028, which will examine when conditions might allow it to lower the 4% inflation target and to what level. Any decision to cut the target would be announced several years before it takes effect.
