MOSCOW — The Bank of Russia cut its key interest rate by 25 basis points to 14 percent, a reversal of the tightening cycle begun in late 2024 to combat inflation that reached 8.1 percent in March.
The decision reflects a deliberate trade-off: support economic activity now, absorb inflation risk later. Ukrainian drone strikes have reduced oil refining capacity by an estimated 1.5 million barrels per day over the past two months, according to energy market estimates, damaging refineries and port facilities in ways that sustain supply-side price pressure even as the central bank eases.
The ruble depreciated 0.8 percent against the dollar following the announcement.
The yield curve reaction was asymmetric. Short-term sovereign bond yields dropped 15 basis points, pricing in the immediate easing. Longer-duration bonds barely moved — a signal that investors are not convinced inflation is contained and are demanding a geopolitical risk premium on extended duration exposure.
The central bank's next policy meeting is scheduled for Sept. 20.
