Russia Holds Key Rate at 14% and Raises Its Inflation Forecast
The central bank kept its rate on hold for the second time in less than two months on Friday and lifted its 2026 inflation forecast to 7.1 to 7.6 percent, as refinery damage kept fuel prices high.
Key points
- Russia central bank kept its key rate on hold at 14 percent on Friday, the second hold in less than two months.
- The decision matched the forecast of all 20 analysts polled by Reuters this week.
- Prices for petrol have risen 21 percent since the start of 2026, and diesel prices are up 13.4 percent.
Russia central bank kept its key rate on hold at 14 percent on Friday, the second hold in less than two months. The bank raised its forecast for inflation in 2026 to between 7.1 and 7.6 percent, up from 6 to 7 percent before. It said rates are likely to stay near current levels in the coming year, and that it still expects inflation to reach its 4 percent target in 2027.
The decision matched the forecast of all 20 analysts polled by Reuters this week. Consumer prices are up 6.2 percent since the start of the year, compared with a 4.8 percent rise in the same period last year. The bank said in its statement: "Current price pressures remain elevated. Inflation expectations stay high."
Fuel did much of the damage
Prices for petrol have risen 21 percent since the start of 2026, and diesel prices are up 13.4 percent. Ukrainian drone attacks put many refineries out of action and set off queues at fuel stations across the country. The bank called the attacks one off factors, but it also said the loss of production capacity is feeding into wider price growth. Underlying price growth has not yet fallen and stays in the range of 5 to 6 percent on an annualised basis, the bank said. Government spending and utility fees also kept pressure on prices in an economy that is close to flat.
The bank added that fuel prices are affecting overall price dynamics, and that the main risk is a longer contraction of production capacity in some sectors. In plain terms, the longer refineries stay damaged, the longer high fuel costs pass into food, transport and goods.
Markets took it badly
The Moscow Exchange stock index fell 1.3 percent after the decision. The rouble moved the other way and strengthened 1.5 percent against the US dollar, to its strongest level since early August. Sofya Donets, an analyst at T-Investments, said both the stock index and the state bond market fell after the decision, and that the outlook had been revised harshly.
What it means
A 14 percent rate keeps borrowing expensive for firms and households. Holding it signals the bank thinks inflation is still the bigger danger. Raising the forecast while holding the rate tells borrowers not to expect cheap money soon. The next test is whether refinery repairs bring fuel prices down before the higher forecast turns into another round of price setting across the economy.