Russia Surprises with Interest Rate Cut Amid Wartime Economic Pressure

Russia's central bank unexpectedly cut its key interest rate to 15.5%, responding to the wartime economy's challenges. The decision, announced days after President Putin's remarks on economic growth, hints at further rate decreases. Inflation, triggered by VAT hike, rose to 6.5% annually, signaling ongoing economic pressures.

In a surprising move, Russia's central bank slashed its key interest rate by 50 basis points to 15.5% on Friday, aiming to buoy the economy grappling with high wartime borrowing costs. This decision, made shortly after President Putin's call to revitalize economic growth, suggests potential further cuts.

The bank emphasized that future rates would depend on inflation trends and expectations, predicting an average rate between 13.5% and 14.5% by 2026. Analysts were divided, with only a third anticipating the cut, as the rouble remained stable.

Russia's economy, initially resilient to sanctions, has slowed significantly. Concerns over inflation are amplified by recent tax increases, with annual inflation now at 6.5%. The central bank cautions against global risks, including potential trade disputes and oil price volatility, which could affect the rouble's value.