Bank of Russia Holds at 14% and Pushes Its Expected Rate Path Higher for 2027

Analysis

The central bank kept its key rate at 14% on October 23 for a second straight meeting, raised its 2026 inflation forecast to 7.1–7.6% and now expects the key rate to average 12.5–13.5% next year, up from 10.5–12.5% in July.

"Today, we have made the decision to keep the key rate at 14% per annum," Governor Elvira Nabiullina said in her statement . The key rate is the price at which the Bank of Russia lends to and borrows from banks, so it anchors what Russian households and companies pay for loans and earn on deposits. The bank cut to 14% on July 24 and held on September 11 .

Why the bank stopped cutting

The bank points to persistent price pressure, including spillovers from temporary production disruptions. Nabiullina put its estimates of underlying inflation at 5–6% in annualised terms, with no decline yet. She pointed to "inflation expectations in the economy staying close to their highest levels of the past years", and said "this situation might last longer than we estimated in July."

The Bank of Russia Press Service's October decision reported annual inflation of 6.8% as of October 19. It said seasonally adjusted price growth averaged 8% at an annual rate in the third quarter, up from 4.8% in the second.

Expectations can reinforce inflation when firms raise prices and workers seek higher wages. Higher borrowing costs can restrain demand and help contain those effects, but cannot directly restore disrupted production. Nabiullina said the bank would therefore need to keep monetary conditions moderately tight for longer.

What the new forecast says

The October forecast , set against the July one , shows the shift:

Inflation, December to December: 7.1–7.6% in 2026, up from 6.0–7.0%; 4.0% in 2027, unchanged.

Average key rate: 14.6% in 2026; 12.5–13.5% in 2027, up from 10.5–12.5%; 9.0–10.0% in 2028, up from 8.0–9.0%.

GDP growth: 0.5–1.0% in 2026, from 0.0–1.0%; 1.0–2.0% in 2027, down from 1.5–2.5%.

Oil price for tax purposes, the Russian crude price the budget is taxed on: $72 a barrel in 2026.

The forecast gives a rounded average key rate of 14.0% from October 26 to year-end; its footnote explicitly leaves a December rate change possible. Nabiullina said current price growth should return to 4% "within 2027 H1."

Higher oil prices can strengthen the ruble and cheapen imports, which could help with inflation. Nabiullina said that channel is muted because the fiscal rule, the budget framework for oil and gas revenue, limits how far global prices move the exchange rate. She said the bank assumes the budget will make a disinflationary contribution over the forecast period. The Bank of Russia Press Service also said changes to fiscal policy could require monetary-policy adjustments.

The bank's October decision also identifies a sharper slowdown in domestic demand as a downside risk to inflation. Faster restoration of production capacity could ease price pressure; a slower recovery or a larger fiscal deficit could do the reverse. These are conditional paths, not commitments about the next rate decision. The higher 2027 path also still averages below today's 14%: it describes slower easing, not a rate hike.

The causal chain

Bank assessment: persistent underlying price pressure and elevated expectations supported the hold and a higher forecast rate path.

Transmission thesis: a higher expected policy-rate path can keep borrowing costs elevated; actual lending and deposit rates also depend on inflation expectations, credit risk and funding conditions. The bank expects lending to grow 8–11% in 2026 and GDP growth of 1.0–2.0% in 2027, below its July range.

Conditional AA interpretation: if the budget spends more than the draft the bank has assumed, rates could stay higher for longer; the October decision promises adjustment, not its direction.

What we're watching

The Summary of the Key Rate Discussion on November 5, which may clarify the options considered, and the next decision on December 18 ( October decision ).

Weekly inflation and the 5–6% underlying range: a clear drop toward 4% could bring cuts back into view sooner than the forecast implies.

The final budget. The bank's baseline assumes the draft, which Nabiullina said returns to a zero structural primary balance in 2029. That is a budget balance adjusted for cyclical effects and excluding interest costs. A looser budget could push the other way.

Sources

Statement by Elvira Nabiullina, Governor , Bank of Russia, October 23, 2026.

Key rate decision, October 23, 2026 , Bank of Russia Press Service, October 23, 2026.

Medium-term forecast , Bank of Russia, October 23, 2026.

Commentary on the medium-term forecast (July forecast) , Bank of Russia, August 5, 2026.

Key rate decision, September 11, 2026 , Bank of Russia.

Key rate decision, July 24, 2026 , Bank of Russia.

Summary of the Key Rate Discussion, July 2026 meeting , Bank of Russia, August 5, 2026.