The Bank of Russia held its key rate at 14% on October 23. Production disruptions and high inflation expectations led it to plan a longer period of tight monetary policy.
The Bank of Russia held its key interest rate at 14% per year on October 23, 2026. In the decision published by its press service, the bank said temporary reductions in production capacity in some industries had increased price pressures. It raised its end-2026 inflation forecast to 7.1–7.6% and expects to maintain tight monetary policy for longer to bring inflation back to 4%.
The board also held the rate at 14% on September 11, when it forecast inflation of 6–7% at the end of 2026. Governor Elvira Nabiullina said after the October decision that more conservative budget plans could, on their own, have allowed a cut. The effects of production disruptions on prices could last longer than expected, however.
Price growth accelerated in the third quarter
In the bank’s October figures, seasonally adjusted price growth rose from an annualised 4.8% in the second quarter to 8.0% in the third. Core inflation measured on the same basis increased from 4.5% to 6.2%. Volatile items such as motor fuel pushed up the overall figure, while indicators used to track more persistent price movements remained around an annualised 5–6%.
Annualising a quarterly pace shows the rate that would result if that pace continued for a year; it does not measure the preceding 12 months. The bank estimated annual inflation at 6.8% as of October 19. Nabiullina also said the October 1 increase in utility tariffs was slightly larger than forecast. The tariff increase was already visible in weekly price data. Households would receive the new bills later in the year, so their expectations had barely responded yet.
Households’ and businesses’ inflation expectations edged down in October but remained close to two-year highs. Expectations among financial market participants and analysts increased. The bank sees firms passing higher costs on to customers and wages rising faster than productivity as risks that could push inflation higher.
“we will need to keep monetary conditions moderately tight for a longer period”
Bank projects a 12.5–13.5% average rate in 2027
The bank forecasts an average key rate of 12.5–13.5% in 2027. Nabiullina said it had raised its rate projection to restrain price increases while production capacity was restored. She expects the current pace of price growth to slow to 4% in the first half of 2027. The bank expects inflation over the preceding 12 months to return to its 4% target during 2027.
| Indicator | 2026 | 2027 | 2028 | 2029 |
|---|---|---|---|---|
| Year-end annual inflation | 7.1–7.6 | 4.0 | 4.0 | 4.0 |
| Annual average key rate | 14.6 | 12.5–13.5 | 9.0–10.0 | 7.5–8.5 |
| Real GDP growth | 0.5–1.0 | 1.0–2.0 | 1.5–2.5 | 1.5–2.5 |
The official forecast table gives average annual inflation separately: 6.2–6.3% for 2026 and 5.2–5.7% for 2027. The year-end figure compares prices in December with the previous December. The annual average compares average price levels across one year with the previous year’s average, so the bank gives separate rates for 2027.
An average rate is not a meeting-by-meeting commitment. The bank puts the average rate for January 1–October 25 at 14.7% and forecasts an average of 14.0% for October 26–year-end, rounded to one decimal place. Its footnote explicitly allows either a rate change or a hold in December. The 12.5–13.5% range for 2027 is also an annual average, not a promise for a particular meeting.
Credit expands as labour shortages ease slowly
The economy is growing at a moderate pace in the second half, according to the bank, which forecasts real GDP growth of 0.5–1.0% for all of 2026. Consumer demand is growing more slowly but remains strong, while investment is recovering from its early-year decline. Business sentiment has improved somewhat from low levels.
Companies are finding it easier to hire, though conditions vary by industry. Nabiullina said wood-processing and ferrous-metals companies were releasing workers, while demand for staff remained high in non-ferrous metals, chemicals and pharmaceuticals. Wages are rising more slowly and their growth is moving closer to the increase in output per worker, although pay is still rising faster. Unemployment is near historic lows, and firms plan more moderate pay increases in 2027.
Nominal interest rates rose across most market segments, along with yields on Russian federal government bonds. Expected inflation has also risen, so the bank sees no material change in real interest-rate conditions. A real interest rate adjusts a nominal rate for realised or expected inflation. Banks are assessing credit risk more cautiously, particularly for large companies, and tightening lending terms other than the interest rate.
Credit grew rapidly in the third quarter, mainly because of corporate borrowing, while retail lending increased more moderately. Nabiullina linked September’s pickup in retail lending to an anticipated change in the Family Mortgage programme. The bank forecasts growth of 8–11% in claims on companies and households in 2026 and 10–13% in money supply. The claims measure includes instruments such as bonds as well as loans, with growth adjusted for exchange-rate and market-price changes. The propensity to save has declined slightly but remains high.
Budget and oil assumptions shape the outlook
Nabiullina said the draft budget envisaged a zero structural primary balance in 2029 and that the central bank expected the budget plan to help reduce inflation over the forecast period. The bank says changes to the announced fiscal assumptions could require it to adjust monetary policy.
The baseline assumes an annual average price for Russian oil used for tax purposes of $72 a barrel in 2026 and $55 in 2027. Those are not current Brent prices. Nabiullina said higher export earnings had supported the ruble in recent months, while the fiscal rule limited the effect of global oil prices on the exchange rate. She also identified tensions in the Middle East as a risk to fuel prices.
Slow restoration of production capacity, high expectations, labour shortages and a larger budget deficit could push inflation up. Weaker-than-expected domestic demand could reduce price pressure. Nabiullina said geopolitical developments could either raise or lower inflation, depending on how they unfolded. The bank will assess price increases, expectations and domestic and external risks when deciding rates.
A summary of the October 23 policy discussion and detailed commentary on the forecasts are due on November 5. The next rate meeting is scheduled for December 18, 2026, with the decision to be released at 13:30 Moscow time, the same time in Türkiye.
Nabiullina’s opening statement in the Bank of Russia’s October 23 press conference runs from 0:34 to 9:25. She explains the hold and the 2027 projections; the link opens at the start of her remarks.
