Economy Minister Maxim Reshetnikov has urged Russia’s central bank to take swift action, as president vladimir Putin appears unwilling to engage in peace negotiations. The minister’s warning comes amid concerns that the Russian economy could face a period of “hypothermia” if current trends continue.

The Bank of Russia (CBR) has projected that annual inflation will decrease to between 7.0% and 8.0% in 2025, eventually reaching its 4.0% target by 2026. However, the central bank’s key interest rate remains elevated at 21%, significantly higher than rates in the UK and the US, where inflation is around 3.5%.

Impact of High Interest Rates and Inflation

Elevated interest rates can stifle economic growth by increasing borrowing costs for businesses, households, and government entities. Simultaneously, high inflation erodes purchasing power, making goods and services less affordable and driving up the cost of raw materials and fuel.

“We also see risks of economic hypothermia in the current regime.”

In august 2023, the CBR implemented an unexpected 350-basis-point rate hike following public criticism from Maxim Oreshkin, then an economic advisor to President Putin, who attributed the weakening ruble to the bank’s lenient monetary policy.

President Putin cautioned economic officials in March against allowing high borrowing costs to freeze the Russian economy, likening it to a “cryotherapy chamber,” a statement many analysts interpreted as a signal to begin easing monetary policy.

Minister’s Concerns and Economic Forecasts

speaking in the State Duma, Russia’s lower house of parliament, Reshetnikov noted that recent inflation figures, when recalculated annually, have been in the 3-4% range.

“We expect that May data will consolidate this trend and we of course expect that the central bank will duly take this into account when taking decisions as we also see risks of economic hypothermia in the current regime,” Reshetnikov stated.

The ministry’s forecast for annual inflation in 2025 stands at 7.6%, which Reshetnikov considers a “realistic” estimate.

Reports indicate that major Russian exporters, including Rusal and Gazpromneft, have reduced their planned shipments of commodities like metal and oil products via rail. this reduction, as revealed in a Russian Railways document seen by Reuters, underscores the tangible consequences of weakened demand amid the country’s economic slowdown.

Gazprom‘s Cargo Cuts and Railway investment Reductions

Gazprom, the Russian energy giant, has reportedly begun to decrease cargo volumes, leading to the Russian railway network scaling back its investment plans. Freight volumes experienced a 6.8% decline in early 2025, following a 15-year low in 2024.

Kyrylo Shevchenko, former chief of the Ukrainian National Bank, expressed his reaction to Russia’s economic challenges on X (formerly Twitter):

He wrote: “Russia’s rail traffic is shrinking. Gazprom is slashing cargo volumes, pushing Russian Railways to cut 2025 investment plans by $408M. Freight volumes dropped 6.8% in early 2025, following a 15-year low in 2024. Imagine, even exports to China are falling due to bottlenecks in Russia’s eastern network. Sanctions, sky-high interest rates (21%), and Russia still chooses to casually attack Ukraine’s railways or the network’s energy infrastructure as if it would solve their real problems.”