Monetary Easing Shifts Into A Higher Gear

Worried about mounting liquidity risks in the Russian financial system, the central bank cut its refinancing rate to 8.00% from 8.25% on December 23, initiating what we believe will be an extensive easing cycle. Although coming a month earlier than we had expected, the move confirms our view that the central bank will continue to monitor the situation on the interbank market for fear of exacerbating an increasingly challenging economic picture. We see an additional 75bps of rate cuts to 7.25% over the course of 2012.

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