Home / Business and Economy / Russia Slashes Rate Amidst Fuel Woes
Russia Slashes Rate Amidst Fuel Woes
19 Jun
Summary
- Central bank cut rate by 25 bps to 14.25%, below expectations.
- Drone attacks on refineries caused fuel shortages and price hikes.
- Budget deficit exceeds targets due to military spending increases.
The Russian central bank announced a 25 basis point interest rate cut, bringing the benchmark to 14.25% on Friday, June 19, 2026. This reduction was less than the 50 basis points analysts had predicted, signaling growing concerns over pro-inflationary risks.
These risks are partly due to recent drone attacks on Russia's refineries and energy infrastructure. These strikes have led to a temporary decline in motor fuel production, with average petrol prices rising 1% in the week to June 15, 2026. Some independent petrol stations increased prices by up to 20% following these attacks.
Economic growth in Russia has slowed, reaching 1% last year from 4.9% in 2024, with a forecast of 0.4% for 2026. The budget deficit for the first five months of 2026 was 2.6% of GDP, surpassing the annual target of 1.6% due to increased military spending.
Finance officials have adjusted their target for achieving a primary budget balance to 2029 from 2027. The central bank had warned that this shift towards a more accommodating fiscal policy could slow the pace of rate cuts necessary for the struggling economy.
