Summary of the Key Rate Discussion released
The publication covers the main aspects of the discussion about the economic situation and inflation, monetary and external conditions, and alternatives to the key rate decision.
The deliberations focused on the assessment of underlying inflation. According to most participants in the meeting, January recorded a one-time adjustment of prices to the increases in VAT, tariffs, and fees, rather than a new inflation trend. Households’ inflation expectations remained unchanged in January, while companies’ price expectations declined in February after their growth during the previous four months. This suggests that potential second-round effects of one-off factors are limited. Other discussants noted that underlying measures of inflation could not be accurately adjusted for the impact of increased VAT. Neither was it possible to completely exclude a potential response of inflation expectations to the price growth acceleration at the beginning of the year, triggered by transitory factors. Hence, additional information is needed to assess inflationary pressures more confidently.
The participants in the discussion stressed that monetary conditions remained tight, thus containing credit activity and supporting the propensity to save at a high level. After a temporary pickup in consumer demand at the end of 2025, its growth rate is expected to moderate in early 2026. The labour market has been easing gradually. In these conditions, it is still possible to expect underlying inflation to return to 4% in 2026 H2.
Most discussants consider that the information available suggests that economic developments are consistent with the forecast. It is essential to bring back the economy to a balanced growth path and inflation to the target smoothly.
Following the discussion, the participants decided to cut the key rate by 50 bp to 15.50% per annum. The Bank of Russia will assess the reasonableness of a further reduction in the key rate at its upcoming meetings taking into account the sustainability of the decrease in inflation and inflation expectations.
Considering that most companies decided not to pass on higher VAT to prices in December, but did this in early 2026 (judging by price statistics), inflation in 2026 is expected to exceed the October estimates. As forecast by the Bank of Russia, in 2026, inflation will equal 4.5–5.5%. In 2027 and further on, annual inflation will stay at the target.
More details on the economic outlook are available in the Commentary on the Bank of Russia’s Medium-term Forecast.