Russia's central bank on Friday left its key interest rate unchanged after a series of 10 cuts as Ukraine's drone strikes on refineries, shipping terminals and e-commerce warehouses threaten to push inflation further above its target.

The series of cuts saw the key rate fall to 14% in July from a mid-2025 high of 21%, a level that continues to restrain activity as the central bank seeks to counter the inflationary pressures arising from high spending on the war in Ukraine.

The Bank of Russia indicated the decision might mark the start of a prolonged pause, but didn't suggest rate rises are on the horizon.

"Current price pressures have increased significantly in recent months," the bank said.

Annual inflation is set to be around 6.0%-7.0% in 2026, return to 4.0% in 2027, and will stay on target further on, the bank said.

In July, the official measure of consumer-price inflation stood at 6%, above the central bank's 4% target, but policymakers warned there is a risk that what they term "a temporary reduction in production capacities in certain sectors" could push it significantly higher.

However, as these effects fade and aggregate demand grows moderately, underlying inflation will resume its decline, the bank added. Underlying price growth has accelerated to 5%-6% in annualized terms, it said.

Inflationary pressures arising from the conflict with Ukraine have long been driven by shortages of workers in parts of the economy as production of military equipment was stepped up and many others were recruited by the army.

But more recently, Ukraine's attacks on Russian oil refineries have reduced the availability of gasoline and sent prices sharply higher. Ukraine has also carried out more than 30 strikes since July on logistics hubs used by Wildberries and Ozon, Russia's two largest e-commerce companies.

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