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Some Central bankers have more to work with than others … proactively preparing for crisis rather than reacting to it has its merits.

This morning, Russian Central bankers raised the benchmark refinancing rate by 100 basis points to 13% after blowing out $148 billion in currency reserves failed to stem the Rubles fall.

This move contrasts with Wednesday’s action by leaders at the People’s Bank of China who lowered the benchmark one-year lending rate by 108 basis points to 5.58% - the lowest level in more than a decade. On the same day the OECD released a bullish report on Australia’s prospects citing the effectiveness of rate cuts there as one of the reasons they predict that the land down under will emerge from recession within a few quarters and realize GDP growth of 1.7% in 09.

As policy makers scramble to avert disaster a clear pattern is emerging. Those who have managed their economies wisely and have interest rates that are sufficiently high can get results from rate cut stimulation. Those countries that kept rates artificially low and encouraged an easy credit environment for too long have little room to cut and get little reaction when they do. Those who have exhausted all their other options and failed to stem devaluation will be forced to raise rates.

We continue to be long China via the FXI exchange traded fund. We believe that a strong interest rate policy is one of the reasons that they will emerge from the global quagmire before the rest of the pack.

Andrew Barber