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The Bank of Russia cut its benchmark rate from 14.25 percent in a move that surprised most analysts polled by Reuters, who had anticipated no change given the inflationary impact of attacks on oil refineries and e-commerce facilities. The central bank revised its 2026 growth projection to a range of zero to 1 percent, down from the previous forecast of 0.5 to 1.5 percent. It raised the inflation outlook to between 6 and 7 percent from 4.5 to 5.5 percent, attributing the shift to a considerable rise in fuel prices, and slightly increased its projection for the average key rate this year.
In its statement the central bank said that the economy grew at a moderate pace in the second quarter of 2026. It added that considerable price growth and higher inflation expectations in the summer months were mainly associated with one-off factors. The bank warned that sustained elevated household expectations could hinder a lasting decline in inflation.
Ukrainian drone attacks have disrupted gasoline supplies, creating long queues at filling stations and driving fuel prices higher, according to Reuters reporting. Strikes on the online retailer Wildberries have also affected consumer activity at the core of the domestic economy. Official data showed the consumer price index rose 0.9 percent in June after a 0.2 percent increase in May, lifting annual inflation to 6 percent from 5.3 percent a month earlier.
Petrol prices have climbed 16 percent since the start of the year, compounding the pressure on consumer costs. Household inflation expectations surged in July to their highest level since March 2022, the initial full month of the conflict in Ukraine, a central bank assessment found. The new growth forecast stands in contrast to the Russian government’s target of 0.4 percent expansion and President Vladimir Putin’s instruction to restore the economy to a sustainable growth trajectory.
Putin met central bank governor Elvira Nabiullina and other officials this week, stating that the economy was stable despite external attempts to destabilise the fuel and energy sector as well as some other areas. Last week he remarked that a key rate cut should be and will be a natural process based on macroeconomic indicators and economic stability. Economist Evgeny Kogan said, “An interesting coincidence: as soon as the president developed expectations of a rate cut, they immediately began to materialise.”
Political pressure on the central bank had intensified before the decision, with state television host Vladimir Solovyov describing its leadership as a bunch of cultists who pit themselves against Commander-in-Chief Putin. A Lieber Institute for Law and Land Warfare assessment placed the number of Ukrainian strikes on Russian energy infrastructure at more than 40 since the beginning of the year. The Baker Institute for Public Policy noted that the cumulative damage has reduced refining capacity, shifting more crude oil toward exports while constraining domestic fuel availability and contributing to the observed price spikes.
