Central banks in Emerging Europe are starting to respond to the economic downturn that has spread across the region. Interest rates were cut this month in the Czech Republic, Hungary and Turkey, and policymakers in Poland looks set to follow suit over the coming weeks. The exception to all this is Russia, where, despite growing evidence that the economy is slowing, rising inflation prompted the central bank to hike interest rates this month. We would not rule out further hikes in Russia over the coming months, but suspect that weaker growth will ultimately cause policymakers to reverse course in 2013.
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