Key events in EMEA and Latam next week

The National Bank of Romania (NBR) has been at odds with the government over its fiscal policy and its plan to tax bank assets. Recent moves by the ruling Social Democrats have complicated efforts to manage monetary policy and to some extent, have thrown into question the central bank's independence. A ROBOR-linked bank tax, announced last month, will tighten credit conditions, which means further NBR hikes could have an amplified impact. This opens the way for the NBR to cut the reserve requirement ratio (RRR) to ease its stance, leaving the vulnerable Romanian leu at the mercy of global sentiment. Needless to say, we see no change 8 January.

CPI inflation well within the target band, contained inflation expectations and recent currency appreciation could build the case for the National Bank of Serbia (NBS) to restart its rate cutting cycle. While there are some inflationary risks on the horizon from strong domestic growth momentum, a volatile external environment is the main reason for the NBS to stay on hold, in our view.