Russia’s easing cycle entering new waters

Russia’s central bank has lowered its policy rate to a post-Soviet low during the current crisis and, with the economy likely to recover slowly and inflation set to remain subdued, further monetary easing lies in store. We expect the policy rate to be lowered from 4.50% now to 3.50% by early 2021. This is more easing than most analysts and the financial markets expect and suggests that there is scope for the rally in government bonds to continue.