The board of the Central Bank of Russia at a monthly meeting resolved to keep the main interest rates and the refinancing rate unchanged t 8.25%, while cutting the rates for REPO auctions, non-market assets and gold backed loans of 12 months from 8% to 7.75%. Although CBR admits that cutting the rates will not have any immediate effect on the monetary market interest rates and liquidity, the decision along with the formulation of the statement signals more flexibility to government’s demands for monetary stimulus: along with the usual inflation risks and inflation of 7.2% exceeding the 6% target, the central bank noted continuous economic decline and higher risks of further slowdown, something it only briefly touched upon in the previous statements. The statement (issued on the same date RosStat shows weak 2.1% y/y GDP growth in Q4/12) also lists monitoring of economic growth prospects as one of the decisive factors for future monetary decisions, along with inflation targets. CBR’s decision and less “hawkish” rhetoric came by surprise, as only a third of analysts surveyed by Reuters expect some decline in interest rates, and it is largely seen as a beginning of a new softer policy cycle. Previously it was expected that current CBR administration headed for three terms by Sergei Ignatiev will remain conservative until ex-EconMin Elvira Nabiullina heads the bank in June.  Nabiullina's work as EconMin indicates that she will pursue softer and more stimulating policies as the head of the central bank, with more tolerance to short-term inflation peaks, while at the same time current CBR's strategy to switch to inflation targeting and fully free float RUB will be pursued. Main interest rates were seen declining by at least 25bps-50bps by the end of the year by analysts surveyed by Finmarket.