Key events in EMEA and Latam next week

The key event next week is undoubtedly the last rate-setting meeting of the National Bank of Hungary (NBH) in 2018. The recent significant drop in headline inflation from 3.8% year-on-year to 3.1% YoY, and the roughly unchanged core inflation at 2.6% YoY, is likely to be interpreted by the central bank as a clear justification they need to maintain loose monetary policy - there is nothing to fear from a price pressure point of view.

We see a possibility that the NBH will up its GDP forecast in its Inflation Report. As for the inflation outlook, the drop in oil prices might result in a downward revision to headline inflation, but as core inflation is still above the previous NBH forecast, we see a slight chance that the central bank will alter its view on the core readings.

Russian activity data for November to be released next week will be statistically supported by a low base effect. We expect to see 3.5% YoY industrial output growth and a 2.0% YoY increase in retail trade - amid decelerating salaries growth and accelerating inflation.

The surprisingly high current account surplus - $16 billion reported for November- despite the drop in oil prices, suggests a significant drop in imports, too. The actual activity in Russia remains uninspiring.

We believe the Czech National Bank (CNB) will remain on hold next Thursday. Although the Czech koruna (CZK) remains weaker when compared with the CNB's expectations for 4Q18 - which could lead to a possible debate over rate hikes, the majority of board members are likely to acknowledge some recent data weakness. It's also worth noting that CZK weakness could be put down to the end-of-year bias, and payments into the resolution fund.

Governor Jiří Rusnok in a later interview reported that he would prefer not to hike until next year because of this end-of-year effect that current data may be exposed to. As such, we expect the next rate hike to come at the beginning of February, when the CNB board will have a new forecast in hand.

We expect industrial output growth of 4% YoY, down from the 7.4% YoY seen previously, though retail sales should still be decent at 7.8% YoY. The overall slowdown of activity in the fourth quarter should be moderate, despite the weaker performance of Western European economies. We forecast 4Q GDP at 4.6% YoY vs. 5.1% a quarter ago.