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The CBRT again kept the policy rate and the interest corridor unchanged at 37% and 35.5-40%, respectively, in line with the market consensus. Following the CBRT’s earlier and faster-than-expected easing as of August 23rd, today’s decision appears to signal caution amid the renewed rise in energy prices.

Consumer price inflation came in at 1.84 % m/m in Aug26, slightly below our expectation and the consensus (1.95% m/m), lowering annual inflation to 31.5%. We maintain our year-end inflation forecast at 30% keeping in mind the volatility in energy prices, uncertainties in supply chains, and unanchored inflation expectations.

In spite of the conflict, 2Q26 growth could surprise to the upside relative to our previous forecast as our monthly GDP indicator nowcasts 3.0% y/y growth for 2Q26, indicating a quarterly growth of around 1.0–1.5%. We keep our 2026 GDP growth forecast at 3.0%, with geopolitical tension as the key downside risk.

Consumer price inflation came in at 1.78% m/m, slightly below our expectation (1.85% m/m) and the consensus (1.9% m/m), bringing annual inflation down to 31.8%. We continue to maintain our 30% year-end inflation forecast, considering volatile energy prices and still-elevated, unanchored inflation expectations.

Despite the drag from the conflict, we expect GDP growth to reach around 2.5% in the first half of 2026. Under our baseline scenario of gradually normalizing energy prices and a prudent policy mix, we maintain our 2026 GDP growth forecast at 3.0%.

Financial conditions did not ease further in May-June period; and macroprudential tightening remained the key sector driver with further restricted credit growth caps. Credit growth is losing momentum, however the overall trend remains above the previous 2 years avg.

After stagnant GDP growth in 1Q26, economic activity remains weak in 2Q26, partly reflecting the impact of the war. We forecast GDP growth of 3.0% in 2026, but uncertainty surrounding the peace process and the commitment of the current policy mix to disinflation continues to cloud the outlook.