By Elena Fabrichnaya and Gleb Bryanski
MOSCOW, July 24 (Reuters) – The Russian central bank cut its benchmark interest rate to 14% on Friday from 14.25% despite a spike in inflation linked to Ukrainian drone attacks on major oil refineries and e-commerce warehouses.
The rate cut was a surprise — most analysts in a Reuters poll this week had said they expected the central bank to keep its key rate on hold due to the rising fuel prices.
The central bank also suggested that the economy might not grow at all this year, cutting its growth forecast to between zero and 1% from a previous forecast of 0.5% to 1.5%.
The bank raised its 2026 inflation forecast to between 6% and 7%, up from between 4.5% and 5.5% previously, citing “the considerable rise in fuel prices”. It also slightly raised its forecast for the average key rate this year.
“In 2026 Q2, the economy as a whole was growing at a moderate pace. Considerable price growth and higher inflation expectations in the summer months were mainly associated with one-off factors,” the central bank said in a statement.
Ukrainian attacks on Russian oil refineries have disrupted gasoline supply, leading to long queues at filling stations and higher fuel prices, while attacks on leading online retailer Wildberries have struck at the heart of Russia’s consumer economy.
Nabiullina said that attacks on Wildberries created supply shocks in the economy and could lead to further price rises, but that it was too early to use monetary policy tools in response.
She also said that insurance firms that provided cover for damaged facilities and goods had enough capital to deal with the consequences of the attacks and did not need support from the central bank.
The consumer price index (CPI) rose by 0.9% in June, before the attacks on Wildberries, following a 0.2% increase in May, while annual inflation was 6%, compared to 5.3% a month earlier, according to official data. Petrol prices are up by 16% since the start of the year.
POLITICAL PRESSURE PILING UP
Household inflation expectations, an important indicator which the central bank examines before making its key rate decision, rose in July to their highest level since market turmoil in March 2022, the first full month of the conflict in Ukraine.
“If they remain elevated, this may impede a sustainable slowdown in inflation,” the central bank said.
The new zero growth forecast runs counter to the government’s hope to achieve moderate growth of 0.4% this year and to President Vladimir Putin’s order to bring the economy back onto the path of expansion.
Putin met central bank governor Elvira Nabiullina and other officials this week and told them that the economy was stable despite “external attempts to destabilise the situation in the fuel and energy sector, as well as in some other sectors”.
Last week Putin said a key rate cut “should be and will be a natural process based on macroeconomic indicators and economic stability”. Some economists interpreted his remark as a signal for the central bank.
“An interesting coincidence: As soon as the president developed expectations of a rate cut, they immediately began to materialize,” said economist Evgeny Kogan.
Political pressure on the central bank to cut the key rate had been piling up ahead of the decision, with outspoken TV host Vladimir Solovyov calling its leadership on state television “a bunch of cultists” who pit themselves against commander-in-chief Putin.
(Additional reporting by Anton Kolodyazhnyy, Darya Korsunskaya, Vladimir Soldatkin, Olesya Astakhova; Writing by Gleb Bryanski; Editing by Andrew Osborn, Gareth Jones and Hugh Lawson)
