Author: Yan Krivonosov
Date: July 26, 2025

On July 25, 2025, the Bank of Russia reduced the key rate for the second time in two months — by 2 percentage points, to 18% per annum. This decision was expected, but it is a significant step confirming that inflation is slowing down faster than forecasts, and the economy is gradually returning to balanced growth.

The reduction of the key rate is not just a technical adjustment, but a signal for the beginning of a new cycle of monetary policy easing. This opens up new opportunities for business, construction, mortgages, and even the crypto market.

1. Why did the Central Bank reduce the rate to 18%?

Main reasons for easing monetary policy
1. Slowing inflation
- Annual inflation has decreased to 9.2% (as of July 21), and in July, deflation was even recorded (-0.05%).
- The Central Bank improved its forecast: by the end of 2025, inflation will be 6–7%, and in 2026 it will return to the target level of 4%.

2. Slowing economic growth
- GDP grew by only 1.5% from January to May (compared to 5% in 2024).
- Consumer demand is declining, and businesses are cutting investments due to expensive loans.

3. Decrease in inflation risks
- The strengthening of the ruble and the decrease in import prices helped to curb inflation.
- However, public inflation expectations remain high (13%), which may slow down further easing of monetary policy.

Why was the rate previously raised to 21%?
In 2023–2024, the Central Bank sharply tightened policy to curb inflation, which reached double-digit values. The high rate (21%) reduced demand for loans, strengthened the ruble, and slowed down price growth. Now that inflation is under control, the Central Bank is beginning to gradually ease.

2. How will the rate reduction affect business and the economy?

For business and investments
- Cheap loans → businesses will be able to refinance debts and launch new projects.
- Increased investments → companies in construction, retail, and IT will be able to develop more actively.
- Improved liquidity → small businesses will have greater access to financing.

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- Mortgage rates are already decreasing:
- In June, average rates fell by 1.5–2.2 percentage points (to 24.5–25.8%).
- After the new reduction in the key rate, market mortgage rates may drop by another 1.5–2.5 percentage points.
- Demand for housing may increase, especially in the secondary market and in the individual housing construction segment.
- However, a full recovery of the market will only occur with rates below 15% (expected in 2026).

For the ruble and the stock market
- The ruble will remain stable (in the range of 77–83 per dollar) as it is supported by a trade balance surplus.
- Stocks and bonds are rising:
- The Moscow Exchange Index may reach 3000 points by the end of the year.
- OFZ bonds are becoming more attractive than deposits.

3. What does this mean for the crypto market and startups?

Cryptocurrencies and blockchain projects
- A decrease in the rate makes risky assets more attractive. If deposit yields decline, investors may actively invest in cryptocurrencies and venture projects.
- Increased investment in IT and fintech:
- Cheap loans will help startups attract funding.
- Crypto projects related to government regulation will receive additional momentum.

Risks for the crypto market
- If the Central Bank slows down the rate reduction due to inflation expectations, appetite for risk may decrease.

Further rate reduction
- By the end of 2025, the rate may drop to 14–16%.

In 2026 — to 12–13%.

Conclusion: the economy is on the path to recovery

The reduction of the key rate to 18% is an important signal that the peak of tight monetary policy has been passed. New opportunities open up for businesses, construction, and investors, but risks remain.

The Russian economy is moving towards stabilization, but the path to 'normal' rates (10–12%) will take another 1–2 years.