The Bank of Russia kept its key rate at 14% on Oct. 23 and lifted its average 2027 rate forecast, signaling that inflation pressure is expected to keep borrowing costs high.
The bank now sees the average key rate next year at 12.5% to 13.5%, compared with 10.5% to 12.5% in its July outlook. It also raised its forecast for 2026 year-end inflation to 7.1% to 7.6%, from 6% to 7%, and expects inflation to return to 4% in 2027. The decision followed a September hold; the bank had cut the rate by 25 basis points in July.
The Bank of Russia put annual inflation at 6.8% through Oct. 19. Its seasonally adjusted measure of price growth, expressed at an annual rate, climbed to 8% in the third quarter from 4.8% in the second. The comparable core-inflation measure reached 6.2%, up from 4.5%.
The bank cited supply-demand imbalances and elevated inflation expectations among the risks keeping price pressures high. It also lowered its 2027 GDP growth forecast to 1% to 2%, from 1.5% to 2.5% in July.
Bank of Russia Gov. Elvira Nabiullina said temporary reductions in production capacity had kept underlying inflation elevated and could affect prices longer than the bank estimated in July. She said increased export earnings from crude and other commodities had supported the ruble, while the fiscal rule limited the exchange rate’s response to global prices.
Reuters reported that high interest rates were weighing on economic growth and increasing the government’s debt-servicing costs.
The bank is due to publish its rate discussion summary and forecast commentary on Nov. 5. Its next rate meeting is scheduled for Dec. 18.
