Russian Central Bank Cuts Key Rate to 18% Amid Economic Slowdown

The Central Bank of Russia cut its key interest rate from 20% to 18% on July 25, marking the second rate reduction this year amid easing inflation and a slowing economy. This move follows a peak rate of 21% in October 2024 and reflects the bank's assessment that inflationary pressures are diminishing faster than anticipated, with domestic demand weakening. Despite the rate cuts, the Central Bank maintains a tight monetary policy stance to meet its 2026 inflation target of 4%, forecasting inflation to drop to 6%-7% in 2025. Economic growth is slowing sharply, with signs of cooling across manufacturing, consumer demand, and business sentiment, raising concerns about a potential recession. The rate cut was urged by government officials and business leaders aiming to stimulate growth, as high borrowing costs have dampened private investment and consumption. While inflation is stabilizing within target ranges, the Central Bank remains cautious, noting inflation expectations have yet to fully adjust downward.