The board of the Central Bank of Russia (CBR) kept the key interest rate unchanged at 14% at its October 23 policy meeting, while raising its 2026 year-end inflation forecast to 7.1%-7.6%, according to the regulator’s October 23 press release.
The hold decision was broadly expected by the market. As IntelliNews reported this week, most domestic economists expected the CBR to keep the rate at 14%, with an immediate resumption of monetary easing largely disappearing from forecasts.
Previously the CBR paused its monetary easing cycle at a 14% key rate in September after ten consecutive rate cuts between June 2025 and July 2026, making the first pause in rate cutting since April 2025.
In the latest press release, the regulator said underlying price growth had stopped declining and remained at a 5-6% annualised inflation rate, primarily because of the temporary reduction of production capacity in individual sectors.
“This requires restrained growth in aggregate demand for the decline in underlying inflation to resume,” the CBR said.
While not mentioned directly, CBR officials had already warned that drone attacks temporarily removed production and logistics capacity from several sectors, stalling Russia’s disinflation trend in 2H26.
The CBR notably worsened its assessment of the near-term inflation outlook. Annual inflation was estimated at 6.8% as of October 19, but the regulator now expects it to accelerate further and finish 2026 at 7.1-7.6%, above the 6-7% range maintained at the September meeting.
Inflation indeed accelerated notably in 3Q26. Seasonally adjusted current price growth averaged 8% annualised, up from 4.8% in 2Q26, while core inflation increased to 6.2% from 4.5% in the previous quarter. Annual inflation was estimated at 6.8% as of October 19 and is now expected to finish 2026 at 7.1-7.6%, above the CBR’s previous 6-7% forecast.
The latest inflation was also due to a stronger-than-expected increase in regulated utility tariffs in October. The tariff increase pushed annual inflation back above 7% and added to expectations that the CBR would keep monetary policy tight.
The regulator said the deterioration was not limited to volatile components, although motor fuel remained one of the main contributors to the recent price spike. The CBR estimates that underlying price growth remains at 5-6% annualised and is no longer declining.
“According to the Central Bank of Russia, underlying price growth is not declining and remains in the range of 5-6% annualised, primarily due to the impact of temporary reductions in production capacity in certain sectors,” the CBR said. “This requires restrained growth in aggregate demand for the decline in underlying inflation to resume.”
Inflation expectations also remain a major obstacle to renewed monetary easing. Although household and business expectations declined somewhat in October, the CBR said they have remained close to their highest levels in two years in recent months, while expectations among financial-market participants and analysts have increased.
The economy continued to grow at a moderate pace in 2H26, according to the CBR, with consumer demand growth slowing but remaining elevated, while investment activity continues to recover from the levels seen at the beginning of the year.
The regulator continues to see proinflationary risks prevailing over disinflationary ones over the medium term. It highlighted the risk that domestic demand could remain stronger than available supply, while temporary production-capacity losses could prove more persistent than currently assumed.
Elevated inflation expectations could strengthen the pass-through of higher corporate costs into prices, while wage growth remaining above productivity growth continues to pose an inflationary risk. The CBR also cited weaker prospects for the global economy, higher global price pressures and geopolitical tensions among the external risks.
As usual, fiscal policy received particular attention from the CBR after the regulator had spent recent months warning that the government’s new budget parameters could alter the interest-rate trajectory. At the previous September meeting, the CBR said it would incorporate the updated medium-term budget plans into its October forecast and warned that a larger structural deficit could require tighter monetary policy.
The October statement indicates that the announced fiscal parameters are currently consistent with the CBR’s baseline disinflation scenario. “The Central Bank of Russia proceeds from the announced parameters of fiscal policy. Over the medium term, it will contribute to slowing inflation,” the regulator said.
However, the CBR explicitly left open the possibility of responding if the government changes those parameters. “If the parameters of fiscal policy change, an adjustment of the monetary policy being pursued may be required,” the regulator warned.
The updated medium-term forecast assumes an average key rate of 12.5-13.5% in 2027. The CBR still expects annual inflation to return to its 4% target in 2027 and remain at the target thereafter.
The next CBR rate-setting meeting is scheduled for December 18.