OREANDA-NEWS. August 27, 2009. According to CBR, the country's M2 money supply (national definition) stood at RUB13,121bn as of 1 August, down 0.3% MoM. The YoY growth figure now stands at -7.7%. Earlier, CBR had reported that in July the money base slumped by 2.3%, reported the press-centre of Otkritie FC.

View: Since monetary tightening does not seem to be aiding economic recovery, but rather negatively impacting and inhibiting prospects for GDP growth, we regard this data as negative. From our point of view, such money dynamics reflect frozen credit and government spending delays.

We think that in order to provide additional stimulus to the economy the authorities should ease its monetary and budget policies, and implement a policy of quantitative easing. It should also continue to cut interest rates and maintain the existing fiscal spending plan. Meanwhile, over the period 7M09, federal spending has accounted for only 48% of what has been budgeted for FY09. We believe that an active "policy package" is precisely what is needed at this juncture.