More Room For Monetary Easing

Further monetary easing is expected in Russia, with the refinancing rate forecast to be cut to a record low 7.50% by end-year. A weaker than expected domestic demand recovery through H110 and contractions in banking sector lending will ensure that disinflationary pressures remain prevalent through the mid point of the year. We stress though, that increasing domestic liquidity amid rising oil prices will eventually filter through to consumer price growth, thus lifting headline inflation through the medium term. Furthermore, we maintain that monetary easing will not have a substantive impact on the uptrend of the rouble, with the currency forecast to continue appreciating through 2010.

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