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[Russia's Central Bank Unexpectedly Cuts Rates by 50 Basis Points to 15.5%, Signaling Further Cuts Possible] ⑴ The Central Bank of Russia unexpectedly cut its key interest rate by 50 basis points to 15.5% on Friday, signaling the possibility of further rate cuts to support the wartime economy, which is slowing due to high borrowing costs. This rate cut comes just 10 days after Putin called on the government and the central bank to restore economic growth. ⑵ Governor Elvira Nabiullina stated that the central bank had considered maintaining the rate or cutting it by 50 basis points and debated the data on the sharp rise in prices at the beginning of the year. "We are now more confident in continuing to cut rates at the next meeting," she said, adding that a "larger step" or a "pause" might be taken in the future, but the signal was not an unconditional commitment. ⑶ The central bank's statement indicated that further rate cuts would depend on inflation, but the baseline scenario assumes an average key interest rate in the 13.5%-14.5% range by 2026. Of the 24 analysts surveyed, only 8 predicted a 50 basis point rate cut, while 16 expected the rate to remain unchanged. (4) The Russian economy showed remarkable resilience to Western sanctions during the first three years of the conflict, but slowed sharply last year due to the central bank's interest rate hikes to combat inflation. The government forecasts 1.3% growth this year, while the central bank maintains its 2026 growth forecast of 0.5%-1.5% and 1.5%-2.5% next year. (5) Capital Economics economist Nicholas Farr called the rate cut a "dovish surprise" but maintained his year-end rate forecast of 13%. The central bank raised its 2026 inflation forecast from 4.0%-5.0% to 4.5%-5.5%, but warned of rising prices in January. Prices have risen 2.1% since the beginning of the year, an annualized rate of 6.5%, due to the government's increase in value-added tax to control the deficit. (6) Nabiullina stated that the central bank does not expect a surge in inflation, believing that the price increases at the beginning of the year have peaked. However, she warned that the ability to further cut interest rates will be limited if the budget deficit widens. Russia's public deficit could balloon to nearly three times the official target by the end of 2026 due to India's reduced oil purchases and increased revenue erosion from oil trade discounts. (7) The central bank acknowledged that Russia still faces global risks. Trump stated this month that an agreement had been reached with India, under which New Delhi would cease purchasing oil from Russia. The central bank lowered its 2026 average oil price forecast by $10 to $45 per barrel from $55 per barrel in October.