Policymakers have been cautious in easing the key rate after hiking it to a two-decade high of 21% in September 2024 to curb surging inflation, largely driven by military spending. In its statement on Friday, the Central Bank said it would maintain a tight monetary policy as inflation expectations “remain high,” underscoring its heedful approach.

Annual inflation stood at 8.2% in early September, more than double the Central Bank’s 4% target. Policymakers said they expect inflation to ease to 6-7% by the end of 2025 and return to the target next year.

The rate cut was widely anticipated, as a growing chorus of voices in Russia’s business community has warned in recent months that a combination of high interest rates and an overvalued ruble was creating a “perfect storm” that could stunt investment and weigh down on economic growth in the years ahead.

Russian GDP grew by just 1.1% year-on-year in the second quarter of 2025, down from the 4.1% growth recorded over the same period last year. Economic growth in the first quarter of 2025 was 1.4% year-on-year.