Russia trying to stimulate the economy with eighth interest rate cut in 12 months

More than four years of war, a tsunami of sanctions, and a host of other challenges—that is what the Russian economy has faced since the Russian invasion of Ukraine in February 2022.

But while the West counted on the sanctions to cripple Putin’s economy, making it impossible for him to continue the war, Russia has not gone bankrupt as of April 2026.

However, as the Kremlin is keeping its cards close to its chest regarding the state of the Russian economy, one question still lingers among experts and analysts:

How is the Russian economy actually doing?

Eighth interest rate cut in a year

The Institute for the Study of War (ISW) noted that the Russian Central Bank said on April 24 that it had reduced its key interest rate from 15 percent to 14.5 percent—its third cut in 2026 and the eighth over the past 12 months.

Earlier reductions were announced on February 13 and March 20, according to official statements.

Central bank governor Elvira Nabiullina said the institution had raised its projected average key rate range for 2026 to 14–14.5 percent, citing rising inflation risks linked to the Middle East conflict and possible fiscal policy changes.

The bank also revised its medium-term oil price forecast upward to $65 per barrel from $45, reflecting global price increases seen in March and April.

Mixed signals from the Kremlin

ISW notes that Russian authorities maintain that unemployment remains at historic lows and that wages are rising faster than productivity.

But despite official reassurances, evidence points to growing economic strain linked to heavy wartime spending, according to ISW.

Low unemployment is widely seen as a reflection of labor shortages, which in turn are pushing wages higher and adding to inflationary pressure across sectors.

Reports also indicate that consumer prices, particularly for groceries, have risen faster than official figures suggest.

At the same time, Russia has increased borrowing and drawn down financial reserves to support its war in Ukraine, raising concerns about long-term sustainability.

Signs of strain deepen

According to the Russian business newspaper Vedomosti, planned layoffs rose by 43 percent since June 2025, reaching over 105,000 by April 1.

Ukraine’s Foreign Intelligence Service reported that Russia’s federal deficit hit 4.6 trillion rubles in the first quarter of 2026, exceeding the country’s full-year target.

ISW notes that the Russian government has also tapped into sovereign wealth funds, sold gold reserves, and increased VAT from 20 to 22 percent at the start of the year, shifting more of the financial burden onto citizens.

Sources: Reuters, Vedomosti, SZRU, Institute for the Study of War, US Federal Reserve, International Monetary Fund

This article is made and published by Jens Asbjørn Bogen, who may have used AI in the preparation