Russia’s central bank on Friday cut its sky-high interest rates for the first time since September 2022, in a sign that inflation pressures — not long ago described by President Vladimir Putin as “alarming” — are beginning to ease.

The Bank of Russia took rates down by 100 basis points to 20%. They had been held at 21% since last October, the highest level since the new benchmark rate was introduced in 2013.

The seasonally-adjusted inflation in April was 6.2%, it said, down from an average 8.2% across the first quarter of 2025.

“While domestic demand growth is still outstripping the capabilities to expand the supply of goods and services, the Russian economy is gradually returning to a balanced growth path,” the central bank said Friday, adding that monetary policy would remain tight “for a long period” in order to return inflation to its 4% target.

Russia’s full-scale invasion of Ukraine in February 2022 has put immense strain on prices, with a weaker ruble pushing up import prices, and on an economy it has had to re-orient through subsequent years of war.

Russia’s economy minister Maxim Reshetnikov had urged the central bank to cut rates earlier in the week, as concerns mount about falling output in various sectors. Russian gross domestic product growth rebounded strongly after a period of sharp contraction across 2022 and early 2023, but fell to 1.4% in the first quarter 2025 from 4.5% at the end of last year. Economists meanwhile note that growth has been concentrated in manufacturing, specifically in defense and related industries, and propped up by state spending.

Hopes at the start of the year that U.S. President Donald Trump might be able to push Moscow and Kyiv toward a lasting ceasefire or even a deal to end the war have dwindled quickly, and direct attacks between the countries continue.

Despite this, the ruble is the world’s best-performing currency so far this year, according to Bank of America, attributed to capital controls, policy tightening and a decline in the U.S. dollar. The greenback was 2.72% higher against the ruble on Friday following the rate cut announcement.

Nicholas Farr, emerging Europe economist at Capital Economics, said the cut to 20% was a dovish surprise to the market – meaning a deeper cut than expected – and forecast rates would end the year at 17% from a previous estimate of 18%.

“That said, demand-supply imbalances from the war suggest interest rates will need to stay in restrictive territory,” Farr added.

— CNBC’s Lee Ying Shan and Holly Ellyatt contributed.