Finance
Russia's Nabiullina says the central bank will cut rates with caution
Published by Global Banking and Finance Review
Posted on September 25, 2025
2 min readLast updated: January 21, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on September 25, 2025
2 min readLast updated: January 21, 2026
Governor Nabiullina of the Russian central bank stresses a cautious approach to rate cuts to prevent inflation, amid upcoming VAT changes.
SOCHI, Russia (Reuters) -The Russian central bank will proceed very cautiously with lowering its key rate, Governor Elvira Nabiullina said on Thursday, speaking after the government announced plans to raise value-added tax from next year.
"I want to confirm that we will continue moving forward, carefully calibrating each step," Nabiullina said. "Additional, overly rapid easing of monetary conditions could lead to the risk of restarting the inflation spiral," she added.
Nabiullina generally backed the draft budget, calling it "disinflationary". She warned about a one-off increase in inflation when VAT goes up but played down its sustainability and importance.
"Even if such an effect occurs, it would be a temporary, one-time effect," Nabiullina said in reference to the tax increase.
"It may to some extent influence the pace of decline in inflation expectations, but unlike deficit growth as a possible alternative through borrowing, it certainly cannot be a source of sustained inflationary pressure," she said.
Nabiullina praised the government's proposal to lower the cut-off price for oil above which oil revenues go into the fiscal reserve fund to try to ensure that the fund is sufficiently replenished.
The central bank cut its key interest rate by one percentage point to 17% on September 12. It sees the average key interest rate at 12% to 13% in 2026, expecting inflation to return to its target of 4% from the current level of around 8%.
(Reporting by Elena Favrichnaya; writing by Gleb Bryanski; Editing by Ros Russell)
Nabiullina stated that the central bank will proceed cautiously with lowering its key rate, emphasizing careful calibration of each step.
Nabiullina described the draft budget as 'disinflationary' but warned of a temporary increase in inflation due to a VAT hike.
The central bank expects the average key interest rate to be between 12% and 13% by 2026.
She indicated that any inflationary effect from the VAT increase would be a temporary, one-time occurrence.
Nabiullina praised the proposal to lower the cut-off price for oil that would direct revenues into the fiscal reserve fund.
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