**Russian Central Bank Cuts Key Interest Rate to 18%**
The Russian Central Bank has announced its second key interest rate cut this year, lowering it from 20% to 18%. This decision comes as the bank’s statement revealed that inflationary pressures are easing faster than expected and domestic demand is softening. The move signals a gradual return to a more balanced growth path for the country.
The Central Bank emphasized that it will maintain tight monetary conditions necessary to achieve its inflation target set for 2026. In its baseline outlook, the bank projects the average key interest rate will range between 18.8% and 19.6% per annum in 2025, before easing to 12%–13% in 2026.
**Economic Outlook**
The Central Bank forecasts annual inflation to fall to 6%–7% in 2025, with a return to the 4% target in 2026, assuming no major economic shocks. This projection suggests that the Russian economy is on track to recover from its recent slowdown, brought on by plummeting oil prices and sanctions imposed by Western countries.
**Government Pressure**
Russian Economy Minister Maxim Reshetnikov had urged the central bank to cut rates in June to boost growth, aiming to achieve a 3% growth target set by President Vladimir Putin. However, Governor Elvira Nabiullina has been hiking borrowing costs in response to skyrocketing inflation. Putin expressed displeasure with the decline in private investment due to high credit costs.
**Impact on Economy**
The economic slowdown has forced Russia to slash key projects across various sectors. Major Russian exporters have cut down on rail shipments of metals and oil products, even beyond earlier projected reductions. This development highlights the challenges faced by the country’s economy in the face of global sanctions and economic headwinds.
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