Russia cuts interest rates, but less than expected

The reduction follows a decline in the first quarter of this year when the non-military sector was burdened by high borrowing costs and labor shortages.

The Russian central bank called the decline temporary and said in a statement that economic growth had now returned and was continuing at a moderate pace. Analysts had expected a cut to 14 percent to curb corporate borrowing costs.

The deficit has surged to nearly $80 billion for the first five months of the year, as a result of the war in Ukraine.

"The structural primary budget deficits that persist until 2029 may require a tighter monetary policy than indicated in the baseline scenario," the central bank stated.