MOSCOW, July 24. /TASS/. The Bank of Russia has decided to lower its key rate from 14.25% to 14% per annum, contrary to analysts’ forecasts that it would remain unchanged. That said, the Central Bank pointed to the need for a more gradual rate reduction, according to the regulator’s press release.

"On July 24, 2026, the Bank of Russia Board of Directors decided to cut the key rate by 25 basis points to 14.00% per annum. <…> Considerable price growth and higher inflation expectations in the summer months were mainly associated with one-off factors. Measures of underlying inflation remain within the range of 4-5% in annualized terms. <…> Nevertheless, given the direct and second-round effects of the temporary decline in production capacities in certain sectors and more expansionary fiscal policy over a three-year horizon than projected in April, a smoother key rate decrease is required," the regulator said.

The Bank of Russia noted that it will make further key rate decisions based on the dynamics of inflation and inflation expectations as well as the analysis of risks posed by domestic and external conditions.

In Q2 2026, the current seasonally adjusted price growth averaged 5% in annualized terms compared to 8.7% in Q1 2026, and 4.3% in Q4 2025, the regulator noted. "On average, the similar indicator of core inflation was down to 4.2% from 6.2% in 2026 Q1 and 4.9% in 2025 Q4. Current price growth sped up in June-July. Price dynamics in recent months were considerably affected by volatile components, including motor fuel, fruit and vegetables. Measures of underlying inflation remained within the range of 4-5% in annualized terms. As of 20 July, annual inflation stood at 5.9%," the press release said.

Inflation expectations of households, businesses, and financial market participants went up. If they remain elevated, this may impede a sustainable slowdown in inflation, the Bank of Russia stressed.

"According to high-frequency data, the economy as a whole grew moderately in Q2 2026. Economic growth was mainly driven by consumer demand. Investment activity recovered somewhat but remained moderate overall. However, the impact of the temporary contraction in production capacities on output in certain sectors increased since June. Businesses’ expectations of future demand and output dropped over the past month. Among other things, this may indicate a slowdown in consumption growth in H2 2026. Overall, the 2026 GDP growth forecast was revised downwards to 0.0-1.0%. The 2027-2028 forecast was not changed," the regulator added.

The labor market tightness has been gradually easing, the Bank of Russia noted. "According to survey data, business staffing levels increased. Companies’ plans for wage indexations in 2026 barely changed. Wage increases slowed but continue to outpace labor productivity growth. Unemployment stays at its record lows," according to the press release.

Monetary conditions are assessed as moderately tight. Interest rates rose in most segments of the financial market. Taking into consideration rising inflation expectations, monetary conditions eased somewhat in real terms. Non-price bank lending conditions are still tight.

"Lending activity slowed in June mainly due to corporate lending dynamics. Contrastingly, the growth of the corporate loan portfolio sped up. Households’ propensity to save edged down," the Central Bank said.

Proinflationary risks still prevail over disinflationary ones on the medium-term horizon. "The key proinflationary risks are associated with larger second-round effects from the temporary shutdown of production capacities in certain sectors. They may arise due to a more notable pass-through of costs to prices and high inflation expectations. Proinflationary risks associated with a long period of wage growth outpacing productivity growth as well as with a deterioration in the global economic outlook and rising global price pressures amid geopolitical tensions are still in place. Disinflationary risks involve a more significant slowdown in domestic demand," the regulator concluded.

The Bank of Russia upgraded its forecast for the average key rate through the end of 2026 from 14-14.5% to 14.5-14.6%. The forecast for the average key rate for 2027 was revised upward from 8-10% to 10.5-12.5%. The forecast for 2028 was also upgraded to 8-9% from 7.5-8.5%. The forecast for 2029 stands at 7.5-8.5%.

The regulator also downgraded its forecast for the oil price used for taxation purposes in 2026 from $65 to $60 per barrel. The forecast for the oil price used for taxation purposes for 2027 and 2028 was downgraded to $50 from $55, while the forecast for 2029 equaled $50.

The Bank of Russia maintained its forecast for mortgage lending growth in Russia in 2026 at 6-10%. The regulator upgraded its mortgage market growth forecast for 2027 to 7-12%. For 2028 and 2029, the Central Bank expects annual growth of 10-15%. The Central Bank downgraded its forecast for household lending growth in 2027 to 5-10% from the previous range of 8-13%. This year's outlook for household lending growth remained unchanged at 5-9%.

The forecast for growth of bank lending to companies in 2027 was downgraded to a range of 7-12% from the previous 8-13%. The forecast for corporate lending growth remained unchanged at 7-11% for 2026, and at 8-13% for 2028 and 2029.