19 June 2026
Inflationary risks to the Russian economy in the near future have “significantly increased,” Central Bank Governor Elvira Nabiullina stated at a press conference on Friday.
She cited rising fuel prices as a threat to inflation, as well as the budget situation, which could significantly exceed plans this year. According to Bloomberg, additional spending will be required for the war, which will cost the treasury 4-5 trillion rubles more than budgeted.
The budget risk is “already materializing,” but “uncertainty remains regarding its scale,” Interfax quoted Nabiullina as saying.
Furthermore, inflation in June will be impacted by “the surge in fuel prices,” the head of the Central Bank added. According to Rosstat, gasoline prices at retail have risen by almost 1% for two weeks in a row, and have increased by 6.6% since the beginning of the year—double the increase over the same period last year. “The rise in gasoline prices could also impact inflation expectations, as it is a fairly sensitive commodity for both individuals and companies,” Nabiullina said.
According to the Ministry of Economic Development, inflation has begun to accelerate again since the beginning of summer after decelerating almost continuously throughout the year. From 5.31% at the end of May, the consumer price index (CPI) growth rate increased to 5.63% by June 15.
“This scenario could limit the scope for further key rate reduction,” Nabiullina warned. At its meeting on Friday, the Central Bank cut it to 14.25% per annum—a 0.25 percentage point reduction, the smallest step in the past nine meetings at which the Central Bank has eased monetary policy.
In its forecasts for the current year, the Central Bank had projected an average rate of 14-14.5%, 8-10% for 2027, and a return to a neutral level of 7.5-8.5% for 2028. Given the new regulations, the transition to a neutral rate could occur later, Nabiullina said.
Reducing the rate from 14.5% to 14.25% is a solution to the dilemma of “loyalty” and “normality,” notes economist Kirill Rodionov: the Central Bank cannot undertake a significant reduction in the face of increased risks of fiscal policy easing, but at the same time, it cannot ignore the “demand from above,” which was directly articulated at a meeting with Vladimir Putin.
Essentially, Elvira Nabiullina has signaled that the rate-cutting cycle may be over, according to Alexey Tretyakov, founder of Aricapital. Analysts at Renaissance Capital and T-Bank predict that the Central Bank will continue easing policy, but at a slower pace—to 13% or above 13% by the end of the year.
In any case, “the risks of a further increase in the budget deficit will further complicate the Central Bank’s task,” Rodionov emphasizes.
An increase in inflation happens automatically when there is a lack of fuel. Unquestionably, fuel is essential for virtually everything in an economy and daily life.