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Home > Finance > Kremlin says central bank is on top of inflation but government is watching closely

Kremlin says central bank is on top of inflation but government is watching closely

Published by Global Banking and Finance Review

Posted on January 20, 2026

2 min read

Last updated: January 20, 2026

Kremlin says central bank is on top of inflation but government is watching closely - Finance news and analysis from Global Banking & Finance Review

Tags:monetary policy economic growth interest rates

Quick Summary

Russia's central bank manages inflation amid VAT hikes, with the government closely monitoring economic stability and interest rates remaining high.

Kremlin says central bank is on top of inflation but government is watching c...

Central Bank's Inflation Management

MOSCOW, Jan 20 (Reuters) - Russia's central bank is monitoring the situation with rising prices in the country and taking measures to maintain stability, the Kremlin said on Tuesday when asked about the inflationary impact of a rise in valued-added tax.

Impact of VAT Increase

VAT rose by 2 percentage points at the start of the year, to 22%, in a move designed to boost the state budget and compensate for increased military spending and falling oil and gas revenues.

Government's Role in Monitoring

Asked if the Kremlin was worried that inflation might exceed the central bank's forecast range of 4-5%, spokesman Dmitry Peskov told reporters there were no such concerns at this point.

Interest Rates and Consumer Prices

"In fact, the central bank is monitoring the situation and taking the measures it deems necessary to maintain macroeconomic stability. So far, this has been successful," he said.

He said the government was watching the situation closely and "discussions will take place as necessary".

The Russian central bank has maintained high interest rates for years, squeezing consumers and drawing complaints from businesses, in an effort to bring inflation back down to its target of 4%.

The key interest rate now stands at 16%. Consumer prices rose by 5.59% last year, compared to 9.52% in 2024, but household inflation expectations remain high.

Economists say the VAT rise sparked faster-than-expected price growth in the first half of this month, and some analysts predict the central bank may therefore refrain from cutting rates again when it next meets on February 13.

(Reporting by Anastasiya Lyrchikova; Writing by Mark TrevelyanEditing by Andrew Osborn)

Key Takeaways

•Russia's central bank is actively managing inflation.
•VAT increased to 22% to boost the state budget.
•Government closely monitors inflationary trends.
•Interest rates remain high to stabilize the economy.
•Economists predict potential rate hold in February.

Frequently Asked Questions about Kremlin says central bank is on top of inflation but government is watching closely

1What is inflation?

Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).

2What is a central bank?

A central bank is a financial institution that manages a country's currency, money supply, and interest rates. It oversees the banking system and implements monetary policy.

3What is VAT?

Value Added Tax (VAT) is a consumption tax levied on the value added to goods and services at each stage of production or distribution.

4What are interest rates?

Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the principal amount. They are influenced by central bank policies.

5What is monetary policy?

Monetary policy refers to the actions taken by a central bank to control the money supply and achieve specific goals such as controlling inflation, consumption, growth, and liquidity.

Central Bank's Inflation Management

Impact of VAT Increase

VAT rose by 2 percentage points at the start of the year, to 22%, in a move designed to boost the state budget and compensate for increased military spending and falling oil and gas revenues.

Government's Role in Monitoring

Asked if the Kremlin was worried that inflation might exceed the central bank's forecast range of 4-5%, spokesman Dmitry Peskov told reporters there were no such concerns at this point.

Interest Rates and Consumer Prices

"In fact, the central bank is monitoring the situation and taking the measures it deems necessary to maintain macroeconomic stability. So far, this has been successful," he said.

He said the government was watching the situation closely and "discussions will take place as necessary".

The Russian central bank has maintained high interest rates for years, squeezing consumers and drawing complaints from businesses, in an effort to bring inflation back down to its target of 4%.

The key interest rate now stands at 16%. Consumer prices rose by 5.59% last year, compared to 9.52% in 2024, but household inflation expectations remain high.

(Reporting by Anastasiya Lyrchikova; Writing by Mark TrevelyanEditing by Andrew Osborn)

Frequently Asked Questions

1What is inflation?

Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).

2What is a central bank?

A central bank is a financial institution that manages a country's currency, money supply, and interest rates. It oversees the banking system and implements monetary policy.

3What is VAT?

Value Added Tax (VAT) is a consumption tax levied on the value added to goods and services at each stage of production or distribution.

4What are interest rates?

Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the principal amount. They are influenced by central bank policies.

5What is monetary policy?

Monetary policy refers to the actions taken by a central bank to control the money supply and achieve specific goals such as controlling inflation, consumption, growth, and liquidity.