The Central Bank lowered the key rate to 14.5%, but inflation risks remain

At a meeting of the Board of Directors on April 24, 2026, the Bank of Russia decided to reduce the key rate by 50 basis points (bp) to 14.5% per annum. The regulator notes that the dynamics of domestic demand is gradually approaching the possibilities of expanding the supply of goods and services, which creates the prerequisites for further cooling of the economy. The steady rise in prices is not slowing down. Despite the reduction in the rate, the indicators of steady price growth have not yet shown a downward trend. According to the Bank of Russia, they remain in the range of 4-5% in annual terms. This means that core inflation (stripped of temporary and seasonal factors) continues to remain elevated. In addition, there remains significant uncertainty about external conditions and fiscal policy parameters, which limits the scope for more aggressive monetary policy easing. Rate forecast for 2026-2028 The central Bank has adjusted the forecast range of the average key rate: - 2026 - narrowing of the forecast range from 13.5–14.5% to 14-14.5%. In fact, the upper limit remained the same, and the lower one was increased by 0.5 percentage points . In 2027, the forecast was increased: now the average rate is expected to be 8-10%, whereas previously it was predicted 8-9%. In 2028, the forecast remained unchanged at 7.5–8.5%. Thus, the regulator is signaling that the period of tight monetary policy may last longer than previously expected. The state of the economy and inflation In the first quarter of 2026, the Russian economy showed a slowdown. This is due, among other things, to the adjustment of the business to the tax changes that have occurred. Investment activity also remains subdued. At the same time, expectations of future inflation remain elevated, a factor that may hinder its steady slowdown. In other words, the population and businesses continue to build high inflation expectations into their behavior, which in itself accelerates prices. Inflation forecast The Bank of Russia expects that while maintaining the current course of monetary policy: - Annual inflation will decrease to 4.5–5.5% in 2026. - Stable (core) inflation will be close to 4% in the second half of 2026 and will remain at the target level in the future. For reference: according to the Central Bank's estimate for April 20, 2026, annual inflation in Russia was 5.7%. Adjusting lending forecasts The regulator also revised expectations for lending rates for 2026.: - The growth of lending to companies has been reduced from 7-12% to 7-11%. - The growth of mortgage lending is a narrowing of the corridor from 6-11% to 6-10%. The adjustment reflects the Central Bank's more cautious expectations regarding the recovery of credit activity in the context of continued tight monetary conditions.