_Economy and Finance

Ukraine: the government resignation - and substantial reshuffle ahead In Ukraine, the president accepted the resignation of PM Azarov, which means resignation of his cabinet. This event was very expected and following to the parliamentary elections. However, now we expect quite substantial reshuffle of the cabinet and new figures to be recruited to the government. First of all, it was widely announced that the ministers who were elected to the Rada are planning to work there. This implicitly means that politically charismatic ministers such as Vice PM Sergei Tigipko, the minister of justice Alexander Lavrinovich, minister of economy Petr Poroshenko, minister of emergency Victor Baloga, minister of transportation Boris Kolesnikov, minister of regions Anatoly Blyznyuk and minister of sport Dmitry Tabachnik are likely to become a new parlament deputies.

Russia: the CBR left rates unchanged in Nov as expected In Russia, the CBR made decision to leave all key rates (depo, repo and refi) unchanged in November. This decision has been highly expected as CPI inflation slowed to 6.5%y/y in October, providing the CBR time for manoeuvre. However, we generally see October's relief in food price pressure as temporary and expect a new round of food inflation soon, resulting in a new acceleration of CPI inflation. This makes monetary tightening likely. We expect the CBR to hike rates by 25bp in Dec and see refi rate at 8.5% by 2012-end (flat in 2013). The decision is planned to in the first ten days of Dec (presumably, 7 Dec 2012).