Bank of Russia Expected to Hold Its Key Rate at 14% as Drones Keep Reaching Moscow

The Bank of Russia's board meets on Friday, and most analysts expect it to keep the key rate at 14%. Russian analysts surveyed before the meeting linked the pause in easing to faster inflation in early October and new federal budget figures. A minority of analysts raised the possibility of an increase, and others expected a small cut. Most forecasts expect cuts to resume in 2027, with the rate staying in double digits.

Russian banks are already positioning clients for a hold. "If the Central Bank keeps the key rate at 14%, the greatest interest lies in federal loan bonds (OFZ), corporate securities with a fixed coupon, and funds combining money-market instruments, short bonds and floaters," analysts at Sberinvestitsii, Sberbank's investment unit, told TASS. At a 14% rate, the state pays high interest to fund its deficit by issuing OFZ, and savers earn more on deposits than they could in most real investments.

The war is reaching the capital at the same time. Air defenses neutralized five drones approaching Moscow overnight, Mayor Sergei Sobyanin said, according to TASS. In his first interview in his new post, Deputy Prime Minister Andrei Nikitin discussed airports operating under closed airspace and the transfer of ships to the Russian flag, Komsomolskaya Pravda reported. Both are costs that drone attacks and sanctions impose on Russian transport.