Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting on 20 March 2026

Good afternoon. Today, we have made the decision to cut the key rate to 15% per annum.

As we expected, price growth has slowed down, following its temporary acceleration in January. The response of inflation expectations to the increases in VAT and fees has been moderate. Consumer demand is cooling. The economy is approaching its balanced growth path. This has enabled us to continue easing our monetary policy stance. However, there are two important factors of uncertainty which will influence our future decisions. These are changes in the external environment and adjustments to fiscal policy parameters. This calls for a cautious and prudent approach to decision-making in the future.

I would now dwell on the reasons behind our today’s decision.

Firstly, inflation.

In February, current price growth rates declined back to the levels of 2025 H2. This confirms our preliminary estimates that higher VAT, excise duties and fees were passed on to prices mainly in the first few weeks of 2026.

What is essential is that measures of underlying inflation also indicate moderate price pressure in February. As we noted earlier, it is impossible to completely strip out the effect of increased VAT from the calculation of most measures of underlying inflation. Therefore, February is more illustrative of underlying price growth than January. Overall, according to our estimates, current underlying inflation did not speed up at the beginning of the year and stays in the range of 4–5% in annualised terms.

The impact of higher taxes on households’ and businesses’ inflation expectations has turned out to be short-lived. In February–March, inflation expectations returned to last year’s averages. However, despite the notable slowdown in actual price growth over the previous year, inflation expectations remain elevated, which is a matter of concern to us. High inflation expectations are one of the reasons why we need to be cautious when cutting the key rate.

Secondly, the economy.

High-frequency data for the beginning of the year demonstrate cooling in domestic demand, especially consumer activity. As we expected, an additional contributor to this was expensive purchases partly rescheduled for the end of last year when people were seeking to buy some goods before the increases in VAT and the vehicle-recycling fee. Another indicator of moderate demand dynamics in 2026 Q1 is current estimates in business surveys. A considerable decrease in estimates at the beginning of the year was reported by small and micro businesses. In the next few months, as the effects of intertemporal redistribution of purchases dissipate, we will be able to assess the sustainability and magnitude of the deceleration in consumption growth more accurately.

Developments in the labour market are consistent with the earlier trends. Unemployment stays at its record lows. Nevertheless, surveys show that staff shortages have been easing gradually, with companies’ recruitment and wage indexation plans moderating yet further.

Fixed capital investment edged down as of the end of 2025, while staying close to the record highs achieved in recent years. Over 2025, fixed capital investment totalled ₽42.5 trillion, which is almost one-fourth more than in 2021, if assessed in real terms, that is, adjusted for accumulated inflation. However, the situation is still uneven across industries. Investment activity has remained high primarily in manufacturing and services, including owing to government support and import substitution. Investment plans for this year are more moderate. Nonetheless, business surveys show that there are more companies planning to build up rather than reduce their investment and production capacities in 2026.

According to our estimates, the economy’s production capacities have continued to grow and, given the currently observed moderate dynamics of demand, it will align with the supply of goods and services in the next few months. 

Thirdly, monetary conditions.

They have eased somewhat, while remaining tight. Interest rates in the main financial market segments have continued to decline gradually, driven by the earlier key rate decisions.

Credit growth stays moderate. A temporary acceleration in retail lending, which was attributed to heightened demand before the change in subsidised mortgage terms, has been expectedly followed by a cooling. Corporate lending has returned to moderate growth rates after the seasonal effects of budget spending dissipated.

Concurrently, the propensity to save remains high compared to historical levels, while declining slightly. Its decrease is natural amid monetary easing and is very smooth. The growth rate of monetary indicators is currently close to the level observed over the period of sustainably low inflation.

Now, I would like to speak of external conditions.

They have been in the limelight in recent weeks. The situation in the Middle East has been considerably influencing global commodity markets. The resulting effect on the Russian economy will depend on the duration and scale of these geopolitical events.

On the one hand, in the short term, the domestic economy will be mostly influenced through higher prices for crude oil and other Russian exports. This is a factor supporting export earnings and the ruble. On the other hand, in the longer run, the situation in the Middle East might adversely affect both global demand and investment growth prospects, accelerate inflation in economies importing energy commodities, and disrupt supply chains. Actually, this is yet another supply shock that will influence costs worldwide and, to a certain extent, pass through to prices in the Russian market. Additionally, problems in logistics may have a negative effect on the quantities of Russian exports.

So far, it would be premature to give any estimates of the overall effects of external events on the Russian economy.

The ruble has weakened over the past few weeks, but its exchange rate is hovering in the range of the previous year. It is too early to speak of a clear trend forming. The exchange rate was not a determinant factor for our today’s decision.

I will now speak of risks.

As before, we consider that proinflationary risks prevail.

The risks of second-round effects of the increases in VAT, excise duties, and fees, including of their impact on inflation expectations, have subsided. However, the estimates of future inflation, especially among households, remain elevated. Their decrease might be additionally slowed down by adverse external developments. Risks associated with staff shortages persist.

As I have already noted, the external environment is a factor of rising uncertainty.

Fiscal policy is another important factor having a notable impact on room for cutting the key rate. Changes in fiscal policy parameters relative to the earlier announced ones might increase or limit room for lowering the key rate. In view of this, all the parameters are critical, including the configuration of the fiscal rule, the size of the budget deficit, taking into account parameters of regional budgets, and the sources of financing the deficit. As we said earlier, the decline in the cut-off oil price provided for by the fiscal rule should lead to a commensurate revision of spending, which is necessary to ensure a balanced federal budget. If this happens, the effect will be disinflationary. By contrast, if changes in the fiscal rule parameters are not accompanied by adjustments to budget expenditures but only entail higher borrowings, this will require tighter monetary policy, all else being equal.

Winding up, I would like to comment on our future decisions.

Considering the dynamics of inflation and inflation expectations and the cooling in domestic demand, today, we have made the decision to cut the key rate. However, the uncertainty associated with the external environment and future fiscal policy parameters has notably increased. We might need time to comprehend how the situation will be unfolding. At the upcoming meetings, we will assess the need for a further key rate cut, but this will not be done as a matter of course.

It is our well-balanced and consistent monetary policy that has formed the prerequisites for returning inflation to the target. We will move forward in a smooth and balanced manner so as to bring inflation down to 4% and stabilise it sustainably close to this level further on.

Thank you for your attention.