File Photo: Russia s central bank in Moscow. (Photo courtesy of TASS)
The Bank of Russia lowered the rate by 50 basis points to 7.5 percent as inflation slowed in the country.
The bank had raised its rate drastically from 9.5 percent to 20 percent after the country was hit with Western sanctions over Russia's military operation in Ukraine.
But it has been cutting borrowing costs in recent months.
"Developments in business activity are better than the Bank of Russia expected in July," the bank said in a statement.
"The external environment for the Russian economy remains challenging, invariably putting significant constraints on economic activity."
Annual inflation hit 17.8 percent in April in Russia, surpassing a 20-year record. It has slowed to 14.3 percent in August.
Central banks elsewhere from the United States to Europe are raising rates to combat inflation that has soared since the conflict in Ukraine erupted in late February.
Central banks cut borrowing costs when they want to spur economic growth.
But Bank of Russia Governor Elvira Nabiullina signalled that her institution was done with rate cuts as inflationary risks are growing.
The bank's rate reduction cycle was "now close to its end" as "there are multiple signs suggesting that inflationary pressure is ceasing to weaken", she said.