A sense of half-measure: the key rate can be maintained at 16.5% until the end of the year

The Bank of Russia lowered its key rate to 16.5% following a meeting on October 24. Experts interviewed by Izvestia believe that it will not change again until the end of this year. The threat of inflation remains serious, and factors are still shaping up in favor of its possible acceleration. Nevertheless, it is possible that the Central Bank will lower the key in the first quarter of 2026 to 15-16%. Why the regulator worsened its forecasts and what factors influence the rate decision is in the Izvestia article.

How the Central Bank's rate was changed in October 2025

The central bank decided, contrary to market expectations, to reduce the key rate by 0.5 percentage points to 16.5% following the meeting on October 24, the regulator's press service reported.

"The economy is gradually recovering from the severe overheating of last year," Central Bank Governor Elvira Nabiullina said at a press conference following the meeting, explaining the motives behind the board's decision to give a neutral signal to the market.

Inflation has not changed significantly and the risks of price acceleration still remain, so the regulator decided to act cautiously.

In the third quarter, seasonally adjusted price growth accelerated to 6.4% year-on-year compared to 4.4% in the second quarter. Core inflation remained around 4.3%. Most of its stable indicators are in the range of 4-6%. As of October 20, annual price growth reached 8.2% and is expected to reach 6.5-7% by the end of 2025. The acceleration of inflation is mainly due to one—time factors, such as higher fuel prices and faster price increases for vegetables and fruits.

The expectations of the population and businesses for inflation also remain at an elevated level, the Central Bank noted. This in itself may prevent a slowdown in price growth.

The Central Bank notes the stabilization of the economy, but the labor market remains tense. Salaries are growing more slowly than in 2024, but still faster than labor productivity. Unemployment is at a historically low level, and the share of companies experiencing staff shortages is gradually decreasing.

In addition, the Central Bank has updated its medium-term forecast. The regulator expects a higher average key rate in 2026 at 13-15%, as well as lower GDP growth in 2025 at 0.5-1% (previously it was 1-2%). The inflation forecast has been raised to 4-5% in 2026 instead of 4%.

"Steady inflation will reach 4% in the second half of 2026," Nabiullina said.

The Central Bank will maintain a tight monetary policy to bring inflation back to the target level. Mitigation is possible only with a steady decrease in the rate of price growth and the expectations of the population in this regard.

What will happen to the key until the end of 2025

— By the end of the year, there may be a decrease of another 0.5 percentage points, but the probability that the rate will remain unchanged is higher, — said Egor Zinoviev, an analyst at Cifra Broker.

The Central Bank's July forecast initially envisaged a key rate of 14-18% by the end of the year — now it is in this range, said Olga Belenkaya, head of the Macroeconomic analysis department at Finam.

The main argument in favor of maintaining policy rigidity is a gradual increase in inflation over the course of five weeks, said Peter Arronet, chief analyst at Ingo Bank. During this period, it reached a multi-month high of 0.23% after seven days.

Inflation expectations of the population and businesses are growing due to the rise in the cost of gasoline, Finam recalled. In addition, the rigidity in the labor market remains, and the situation is unlikely to change dramatically soon, added the "Digital Broker".

Corporate lending has also accelerated in recent months, Igor Rastorguev, a leading analyst at AMarkets, recalled. This factor is very important for the Central Bank, as the regulator needs to cool down the economy, which is already fueled by increased demand for goods and services.

Even at the first meeting in 2026, on February 13, the rate may also be maintained, said Ilya Fedorov, chief economist at BCS World Investments. However, as early as March, the regulator may announce its reduction to 16%. The Bank of Russia will remain cautious in order to closely monitor the dynamics of inflation expectations and price growth at the beginning of the year.

At the same time, the slowdown in the economy and investment activity requires an early easing of monetary policy, said Boris Kopeikin, chief economist at the Stolypin Institute for Growth Economics. According to the government's baseline forecast, capital investment is expected to decrease next year and minimal GDP growth is expected below the levels of 2023-2024 and global rates. Since the beginning of the year, a number of industries working for the domestic market and exports have already shown a decline.

— The dynamics are hardly acceptable. To prevent the deterioration of the economic situation, the rate should be much lower," Boris Kopeikin believes.

A scenario in which the economic situation worsens cannot be completely ruled out.: The decline in investment activity and problems in civilian industries point to this, added Sergey Zaversky, head of the Analytical Research Department at the Institute for Integrated Strategic Studies. Long-term high interest rates put pressure on companies' capital and solvency, limiting their access to loans (which was confirmed by a survey conducted by PSB and Opora Russia when calculating the RSBI index, which the Central Bank takes into account when making decisions). This increases the risk of bankruptcy and a reduction in the supply of goods and services, which no longer covers demand.

A more rapid mitigation of the PREP is possible if the economic situation is worse than the Central Bank's forecasts, Olga Belenkaya said. If demand or lending suddenly cools down too much, the Bank of Russia may take active action. Geopolitical de-escalation will also contribute to this.

The rate may still be reduced to 15-16% in the first quarter of 2026, but the Central Bank will act cautiously due to the risks of rising inflation, concluded the Digital Broker. This will require a steady slowdown in price growth, lower inflation expectations, and economic stability. By the way, Nabiullina made it clear that the Central Bank believes that it can continue to reduce the key rate, but more carefully.