Bank of Russia cuts rate in June

CBR cuts rates again, but by less than markets had expected: At its meeting on 19 June, the Bank of Russia (CBR) made its ninth consecutive cut by lowering the key rate by 25 basis points to 14.25%. The size of the cut surprised the markets, which had penciled in a 50 basis point reduction as was seen in the previous five meetings.

Smaller cut due to stronger-than-expected fiscal impulse: The Bank of Russia continued its monetary policy easing amid softening inflation and weak economic activity growth in Q2 after Q1’s contraction. Meanwhile, the cut was smaller than in the previous meetings due to accelerating credit and a stronger-than-expected fiscal impulse. Among the new upside risks, the CBR noted a temporary decline in fuel production, likely linked to the recent Ukrainian attacks on Russia’s refineries.

Slowdown in the pace of monetary easing is likely to continue: The CBR did not provide specific forward guidance but stated that due to higher-for-longer fiscal spending, monetary policy could be tighter than in the Bank’s baseline scenario, which had projected an average key rate of 14.0–14.5% for 2026 and 8.0–10.0% for 2027. All our panelists expect further cuts by year-end, ranging from 25 to 525 basis points, with the Consensus for 200 basis points of additional reductions. The CBR will reconvene on 24 July.

Panelist insight: Following the CBR’s latest decision, Clemens Grafe from Goldman Sachs said: “We had said […] that fiscal policy was a material upside risk to our forecast of rates declining by 50bps per meeting to 12% by year-end, but this risk has materialized even earlier than we had expected. With fiscal policy showing no signs of being reined in, the risk is that future cuts may also be smaller than the 50bps we forecast.”

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