MOSCOW (Realist English). The first decade of July 2026 has been marked by a series of important statements and events from the Bank of Russia that have significantly influenced market participants’ expectations.
The Central Bank has confirmed its hawkish rhetoric, and its Governor Elvira Nabiullina has made it clear that further reductions in the key rate may be postponed indefinitely due to persistent pro-inflationary risks.
Key Rate: Room for Reduction Has Narrowed
On July 9, the Bank of Russia published an information and analytical commentary titled “Monetary Conditions and the Transmission of Monetary Policy,” in which it stated that room for cutting the key rate has diminished, and pro-inflationary risks still prevail over disinflationary risks on the medium-term horizon.
The commentary also noted that the trajectory of the average key rate for 2026–2027 had been raised following the key meeting. The regulator forecasts annual inflation to decline to 4.5–5.5% by the end of 2026 and to stabilise at around 4% in 2027.
On June 19, the Bank of Russia cut the key rate by 0.25 percentage points to 14.25% per annum. This was the ninth consecutive cut. However, as early as July, the regulator indicated that this cycle may be paused.
Nabiullina: ‘We Are Not Proponents of High Rates, But an Experiment Is Inadmissible’
On July 1, at the plenary session of the Financial Congress in St Petersburg, Elvira Nabiullina stated that the Bank of Russia is not a proponent of high interest rates and that credit should be accessible. However, she categorically opposed any further hasty reduction of the key rate.
“We could conduct an experiment: take and cut the key rate. We would get — I am absolutely certain of this — a sharp rise in inflation and would fall into stagflation,” the Central Bank Governor said.
On July 2, in response to a question from Izvestia, Nabiullina called talk of signs of economic “overcooling” inappropriate. Earlier, on June 19, she had already promised to revise the key rate forecast upward at the July key meeting.
Market Forecasts and Expectations
Analysts and experts are divided in their assessments of the upcoming meeting of the Bank of Russia’s Board of Directors, scheduled for July 24.
- BCS Mir Investitsiy forecasts that the key rate will remain unchanged — at 14.25% — following the July and September 2026 meetings.
- Economist Yulia Kuznetsova allowed for two scenarios: either a hold at 14.25% or a cut to 14%. In her view, there are grounds for a cut, but the Central Bank’s room for manoeuvre is limited.
- RSPP President Alexander Shokhin stated that the Central Bank may consider raising the key rate due to the situation in the fuel market, although he himself believes this would be wrong. “Fighting non-monetary factors of inflation with monetary tools is not very effective,” he noted.
- Chairman of the State Duma Committee on the Financial Market Anatoly Aksakov suggested that the Central Bank would either pause rate cuts in July or cut by 0.25 percentage points.
Communication Sessions and Exchange Rate Formation
On July 9, a communication session of the Bank of Russia on monetary policy began in Pskov, with the participation of heads of relevant ministries, deputies and representatives of the regional business community. This is a traditional tool for the regulator to engage with entrepreneurs to discuss monetary policy and business expectations.
On the same day, the Central Bank lowered the official dollar rate below 76 rubles, while the euro fell by 76 kopecks to 86.59 rubles.
The first half of July 2026 has shown that the Bank of Russia has taken a course towards tightening its rhetoric and is ready to pause the cycle of key rate cuts. The room for monetary policy easing has narrowed, and pro-inflationary risks — including the fuel crisis and expansionary fiscal policy — are forcing the regulator to exercise caution.
The decisive meeting of the Board of Directors on July 24 will determine the further trajectory of monetary policy for the second half of the year.