Bank of Russia Cuts Key Rate by 200 Basis Points to 18% Per Annum
The Board of Directors of the Bank of Russia cut the key rate by 200 basis points on July 25, 2025, to 18% per annum from the previous 20%. The decision matched the expectations of the majority of analysts and became the second easing step of the cycle that had started a month earlier.
The second step of the easing cycle
The July meeting continued the easing cycle opened in the summer of 2025: on June 6, 2025 the regulator lowered the key rate for the first time since September 2022, from 21% to 20% per annum. The July step was twice as deep as the June one: 200 basis points against 100. Across the two decisions of the cycle the rate has therefore moved from 21% to 18% per annum, a cumulative reduction of 300 basis points.
Key points of the cycle
- June 6, 2025 — the first rate cut since September 2022: from 21% to 20% per annum;
- July 25, 2025 — the second cut: minus 200 basis points, to 18% per annum.
The board's decision was reported by Interfax: according to the agency, the outcome of the meeting matched the forecast of the majority of analysts, while part of the market had priced in alternative scenarios for the size of the step.
Analyst expectations: three scenarios for the step
Ahead of the meeting the professional community was not unanimous about the size of the cut, yet the consensus leaned toward a step of 200 basis points. The distribution of expectations looked as follows:
- the majority of analysts — a cut of 200 basis points, to 18% per annum: this is the scenario that materialized;
- part of the analysts — a more decisive step of 300 basis points, to 17% per annum;
- part of the analysts — a cautious reduction of 100 basis points, to 19% per annum.
The realized outcome turned out to be the middle path between the "decisive" and the "cautious" forecasts: the regulator chose the trajectory supported by the majority of experts polled by the market and neither accelerated nor slowed the easing relative to the consensus.
The regulator's comment
In the accompanying comment the Central Bank of Russia explained the decision by a shift in the balance of factors the regulator tracks when calibrating monetary policy.
Inflation and the economic trajectory
In the Bank of Russia's assessment, inflationary pressure is declining faster than the regulator's forecast had assumed. At the same time the economy is returning to a balanced growth trajectory — the regime in which demand and supply do not create persistent overheating.
The balance of risks
At the same time the regulator stressed that over the medium term pro-inflationary risks still prevail over disinflationary ones. This caveat outlines the boundaries of the current cycle: the rate reduction continues, yet the regulator's caution about medium-term risks remains in place.
The outcome of the meeting
The decision of July 25, 2025 fixed the key rate at 18% per annum and confirmed the consistency of the cycle opened by the reduction from 21% to 20% per annum on June 6, 2025. The combination of a consensus step and a comment about inflation pressure easing faster than expected, against the continuing predominance of pro-inflationary risks over the medium-term horizon, sets the frame in which the market will assess the subsequent decisions of the Bank of Russia board as well.
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