Summary of the Key Rate Discussion released

Current price growth notably slowed in February after its acceleration in January. The VAT increase was generally passed on to prices. In 2026 Q1, inflation was below the Bank of Russia’s February estimates due to weaker consumer activity and a more moderate rise in prices for certain goods (primarily fruit and vegetables), which was below expectations. In January–February, measures of underlying inflation, excluding the impact of higher VAT, ranged from 4% to 5% in annualised terms, as estimated by most discussants.

Monetary conditions eased slightly, while remaining tight. According to high-frequency data, economic activity slowed in early 2026. According to most participants, overheated demand is cooling even faster than assumed in the February forecast, making room for cutting the key rate. However, elevated uncertainty associated with the external environment and fiscal policy requires a cautious approach.

Following the discussion, the Board of Directors decided to cut the key rate by 50 bp to 15.00% per annum. The Bank of Russia will assess the need for a further key rate cut at its upcoming meetings depending on the sustainability of the inflation slowdown, the dynamics of inflation expectations, and the analysis of the risks posed by external and domestic conditions.

According to the Bank of Russia’s forecast, given the monetary policy stance, annual inflation will decline to 4.5–5.5% in 2026. Underlying inflation will be close to 4% in 2026 H2. From 2027 onwards, annual inflation will remain at the target.