Russia Cuts Key Rate to 20% as Ruble Outperforms in 2025

The Bank of Russia slashed its benchmark rate to 20% from 21%, marking the first reduction since October when rates hit their highest level since 2013. The MOVE follows a cooling in inflation, which dropped to 6.2% in April from 8.2% in Q1 2025—a shift from President Putin's earlier characterization of price growth as 'alarming.'

Despite the cut, policymakers signaled tight monetary conditions will persist 'for a long period' to rein inflation back to the 4% target. The central bank noted demand still outpaces domestic supply capacity, though the economy shows tentative signs of rebalancing.

The decision reflects mounting pressure from Russia's economic slowdown. GDP growth plummeted to 1.4% in Q1 2025 from 4.5% in late 2024, with wartime distortions concentrating activity in military and defense sectors propped up by state spending. Economy Minister Maxim Reshetnikov had openly advocated for rate relief earlier in the week.

The ruble's surprising strength this year contrasts with its 2022 collapse following the Ukraine invasion, which sent import prices soaring. Currency markets now price in further stabilization as the central bank walks a tightrope between stimulating growth and containing inflation.