Russia Slashes Rates Again as War Economy Shows Cracks—What It Means for Markets

Moscow doubles down on monetary easing as military spending fails to prop up growth.

The Kremlin's economic gambit hits turbulence—just as global markets brace for volatility.

Another rate cut lands with a thud. Analysts whisper what officials won't admit: the wartime stimulus engine is sputtering. Meanwhile, crypto traders eye capital flight opportunities—because nothing fuels decentralized finance like desperate oligarchs.

Borrowers push back as lending strains increase

Inside Russia, companies and government bodies had been pressing the bank to act, warning that interest rates were too high for businesses to borrow and invest. Several banks have also reported a rise in non-performing loans, pointing to increased stress in the credit system. This growing pile of unpaid debt has added another LAYER of urgency to the central bank’s actions.

Astrov warned that how quickly or slowly the bank cuts going forward will directly affect how bad the loan situation gets. “At the moment I think the situation is not critical overall but if the central bank is too slow in easing or delays easing too much, the situation may become problematic,” he said.

Even with inflation cooling, the central bank doesn’t plan to rush into aggressive easing. Governor Elvira Nabiullina had already said back in June that any rate cuts in 2025 WOULD happen gradually, aiming to push inflation down to a 4% target by 2026.

So far, that target isn’t entirely out of reach. Annual inflation had dropped to 9.4% by June, after running in double digits for much of the year. But that path could shift quickly if budget spending grows again.

Central bank keeps one eye on Kremlin’s spending plans

Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center in Berlin, said the central bank could deliver “two or more” rate cuts during the autumn period, saying, “They signaled this very clearly.” But she also noted it’s too early to say inflation is completely under control, especially if the Kremlin decides to pump more money into the economy.

Prokopenko warned that the state still has access to large amounts of domestic borrowing, and if Vladimir Putin wants to keep the war going, public spending could climb again, pushing inflation right back up.

“There is a huge capacity for domestic borrowings. And if Putin has [the will] to continue the war, which he definitely has, the pace of state spending could turn pro-inflationary,” she said. “So I think the central bank would be cautious.”

While the new 18% rate brings some breathing room, it also raises fresh questions about whether Russia’s central bank can walk the line between easing financial pressure and containing inflation, all while the Kremlin’s war machine remains active.

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