ISTANBUL

The Russian Central Bank decided Friday to lower its key interest rate by 100 basis points to 20%, marking the first rate cut since September 2022.

The key rate currently stands at its 9-month low, as inflation began to ease in Russia.

"Current inflationary pressures, including underlying ones, continue to decline," the bank said in a statement.

The central bank noted that, while domestic demand growth continues to outpace the ability to expand the supply of goods and services, the Russian economy is gradually returning to a balanced growth path.

The tight monetary policy will be maintained until the inflation target is reached in 2026, the bank noted.

"Further decisions on the key rate will be made depending on the speed and sustainability of the decline in inflation and inflation expectations. According to the Bank of Russia’s forecast, given the monetary policy stance, annual inflation will return to 4.0% in 2026 and stay at the target further on," it noted.

The Russian Central Bank increased the policy rate to 20% immediately following the outbreak of the Russia-Ukraine war.

The policy rate remained at 16% from the end of 2023 to the end of July 2024, with four consecutive rate hikes in 2024.

The bank last raised the policy rate by 200 basis points to 21% on October 25, 2024.

While annual inflation in the country was at 10.2% in April, the bank aims to reduce it to 4%.