Russia’s Economy Minister Maxim Reshetnikov has warned that the country’s economy may be cooling too fast, urging the central bank to cut its high interest rate. The Bank of Russia has kept its key rate at 21% since an emergency increase in October. The tight stance helped slow soaring prices but has also choked investment, just as the boost from heavy wartime spending starts to fade.
Economic authorities in the country usually pose a united front, but there have been conflicts in the country concerning high interest rates, large budget spending, and strict capital controls. In August 2023, the central bank was forced to call an unscheduled meeting and lift rates by 3.5 percentage points after President Vladimir Putin’s then-economic adviser, Maxim Oreshkin, publicly blamed “soft” monetary policy.
In March, Putin also urged officials not to freeze the country like a cryotherapy chamber, a remark that analysts have translated to mean a call to begin easing. Speaking to lawmakers in the State Duma on Monday, Reshetnikov said weekly data suggest annualized inflation had dropped to between 3 and 4%. “We expect that May figures will confirm this trend, and we, of course, expect the central bank to consider it, because we also see risks of economic hypothermia in the current regime,” he said.
Russia’s economy shows signs of cooling
A Russian Railways planning paper last week showed major exporters, including aluminum group Rusal and oil producer Gazpromneft, cutting the volumes of metals and oil products they intend to move by rail. The document points to weaker sales at a time when the broader economy is slowing. According to many factories, the 21% borrowing cost is too high and has cut investment plans. The ministry predicts gross domestic product expanding by 2.5% in 2025, compared with the central bank’s forecast of 1 to 2%. The next rate-setting meeting falls on 6 June.
The central bank, on its part, has said it will weigh incoming data but warns that an early cut could reignite price growth if households rush to spend savings and if the ruble comes under new pressure from sanctions or falling export revenues. While economic debate intensifies at home, Russia has shown little interest in peace talks with Ukraine. Military analysts describe recent short “ceasefires” as performative, and efforts by U.S. President Donald Trump to draw President Putin into negotiations have failed.
Instead, Moscow, is expected to launch a fresh summer offensive aimed at securing more ground in the south and east of Ukraine, areas its forces partly occupy. Success on the battlefield could strengthen Russia’s hand in any eventual talks. Even so, growing pressures, from securing enough weapons to coping with sanctions on exports like oil that generate a major portion of the revenue, may pull the Kremlin toward the negotiating table.
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