Russia Cuts Key Rate to 14% Amid Drone-Driven Inflation Surge

On July 24, the Bank of Russia lowered its benchmark interest rate by a quarter-point, from 14.25% to 14%. The move came despite a recent spike in inflation that the central bank linked to Ukrainian drone attacks on major oil refineries and a leading e-commerce warehouse.

Reuters

Ukrainian drones have repeatedly struck Russian energy infrastructure, curtailing oil-processing capacity to its lowest level in more than two decades. The attacks on refineries and the online retailer Wildberries disrupted fuel supply and consumer-goods logistics, pushing petrol prices up 16% since the start of the year and creating long queues at stations. Business-climate surveys turned negative, reaching their lowest reading since May 2022, while the chief industry lobby warned of “autumn bankruptcies.”

Reuters

• Growth outlook: The Bank of Russia now projects 2026 GDP growth of 0-1%, revised from 0.5-1.5%.

Bloomberg

• Inflation outlook: Year-end inflation is forecast at 6-7%, up from the earlier 4.5-5.5% range.

Reuters

• Consumer price index: CPI rose 0.9% in June, with annual inflation at 6%, compared with 5.3% a month earlier.

Reuters

• Expectations: Household inflation expectations climbed to 14.7% in July, the highest since the conflict began.

Reuters

• Financial markets: The MOEX Russia Index fell to its lowest level since October 2022, and the Finance Ministry halted bond auctions for the first time since 2022.

Bloomberg

She added that the central bank is prepared to raise rates further if conditions warrant. The bank indicated that its next policy meeting is scheduled for Sept. 11.

Reuters

• “We are working on the assumption that companies will restore their production capacity by the end of this year,” — Elvira Nabiullina, which governor

Bloomberg

• “Should circumstances change and require it, we are prepared to raise the rate to whatever level is necessary,” — Elvira Nabiullina, which governor

Bloomberg