OREANDA-NEWS. On July 27, 2009 CBR issued a report on the M2 money supply for June. According to the Bank of Russia, as of 1 July 2009, M2 (national definition) stood at RUB13,161bn, rising 2.3% fro the previous month. It is worth noting that at the beginning of June 2008, M2 stood at RUB14,244bn., reported the press-centre of OTKRITIE FC.

View: The monetary squeeze makes it extremely difficult for the economy to embark on the path to recovery. Consequently, we consider June’s growth in the money supply as a positive development. We are hopeful that CBR will continue cutting interest rates more aggressively and loosen monetary policy.

Likewise, we hope that the government will increase spending. We are somewhat concerned that the multiplier M2/monetary base fell from 2.72 in May to 2.65 in June. We suggest that M2 growth was due to government expenditures, and to some extent to the populations’ sales of foreign currency. Credit has remained locked, and it will take time for commercial banks to resume their involvement in the process of money creation.