Russian economy no longer overheating, but no reason to talk about overcooling - CBR

MOSCOW. July 1 (Interfax) - The Russian economy stopped overheating in the first quarter of 2026, but there is no reason to talk about it overcooling, as unemployment remains low and real household incomes are rising, the Central Bank of Russia (CBR) said in a brief for its decision on the key interest rate. The CBR lowered the key rate by 25 basis points to 14.25% on June 19.

"Most participants believed that the positive output gap [overheating of the economy] closed in the first quarter of 2026. The decrease of many indicators of persistent price growth to levels close to 4%, seasonally adjusted in annual terms, pointed to this. Some participants believed that the gap had not closed completely yet. In their estimate, persistent inflation pressure remained above 4%," the CBR said in the brief.

"However, all participants agreed that existing data did not give grounds to talk about overcooling of the economy. Characteristic for it would have been a decrease in persistent inflation indicators significantly below 4%, growth of unemployment and drop in real incomes, which is not being observed," the brief said.

"Some participants also noted that the revival of consumer demand, increase of the budget impulse and slowdown of the decrease in tension on the labor market in the second quarter could indicate that the pressure on prices on the part of demand might again increase. Furthermore, a temporary decrease of production capabilities in certain sectors could lead to an increase in the positive gap without additional expansion of demand. Uncertainty remains regarding the future dynamic of the output gap," the CBR said.