Pace of cuts eases, but rates still set to fall (Apr 09)

We have argued for some time that the pace of monetary easing across the region would slow as concerns about financial stability weigh on policymakers’ minds. This seems to have been borne out by recent statements from Central Banks. But equally, rate hikes are unlikely - at present a few extra basis points of yield are unlikely to attract a huge inflow of foreign capital. We are sticking to our long-held view that interest rates will fall to record lows, although the pace of cuts will be gradual. Policymakers in Hungary and Romania will remain particularly cautious.