Russian Federation Interest Rate

The Bank of Russia held its key interest rate unchanged at the record high of 21% in its December meeting, surprising markets that expected a 200bps rate hike to 23%. The decision took place following reports that CBR Governor Nabiullina recently talked with President Putin and Russian business leaders, who have been vocal against high interest rates despite soaring inflation. The central bank cited low credit activity as the warrant for the pause in rate hikes, but reiterated that underlying inflation continued to rise amid higher expectations from households and business, driving the bank’s inflation forecast to rise for 2025 and 2026. The central bank also noted that the significant weakening of the ruble, unbalanced budget spending, and the ongoing labor force crisis contributed to soaring inflation. November data showed that annual headline inflation was at 8.9%, but early forecasts from the CBR have December's print near 9.5%, translating to the highest since February 2023.