Key events in EMEA and Latam next week

The key data in Hungary next week will be the August inflation reading.

After causing a significant upside surprise in July, inflation is more than likely to stabilise. On a monthly basis, we expect inflation to remain unchanged. Given that, one-off factors were behind the acceleration last month, this time we should see the underlying processes stabilising inflation.

This means a 3.9% year-on-year CPI reading with 4.4% YoY core inflation. In the months ahead, we expect significant deceleration, which should provide monetary policy a break. However, the fiscal story continues to deteriorate but the August deficit will be in line with the updated 7-9% deficit range forecast by the Ministry of Finance.

Czech August CPI should slightly moderate to 3.2% amid weaker food prices though fuel prices slightly improved and core prices were surprising on the upside in recent months despite Covid-19. Still, the central bank should remain on hold for some time as signalled by recent central bank communication.

July industrial production is likely to remain modestly in contraction territory but summer months are usually affected by company holidays, and thus less reliable.

• August balance of payments should show if the current account remains close to zero and whether there is any improvement in the resident capital flows.
• The structure of the 2Q20 GDP drop could affect expectations about recovery. The recent macro statistics for July suggested stronger than expected consumer trend.
• The meeting between the president of Russia and Belarus may hint at the role Russia is willing to take in resolving the political crisis in Belarus. The development of the chemical warfare story would also bring more clarity as to whether it will result in new EU/US sanctions, and if so, whether they would be personal or sectoral, and if it could endanger the Nord Stream 2 gas pipeline project.
• Updated three-year monetary policy guidelines to be released on 10 September, are likely to shed more light on the central bank's take on the recent change in the global monetary policy rhetoric and the increase in market volatility. Currently, the combination of accelerating inflation, faster than expected consumer recovery, and market volatility in July-September are all pointing towards a likely pause in the key rate cut cycle.