Key events in EMEA and Latam next week

The central bank of Turkey was encouraged by the downside surprises in the recent inflation data while the pace of disinflation provides confidence for the timing of a rate cut. Not only a better-than-expected inflation outlook but more accommodative policy signals from global central banks and strengthening of the lira with a contribution of declining geopolitical risk anticipation likely encourage the CBT to start the easing cycle.

We expect a 200bp cut on 25 July, though given the market’s increasing concerns about credibility with the appointment of the new Governor, risks are on the downside.

We maintain our long-standing expectations of a 25bp cut to 7.25% for Bank of Russia’s upcoming meeting on 26 July, which has now become a consensus view.

We doubt that a 50bp cut is a plausible scenario for a non-core meeting, but the central bank's commentary maintains the dovish signal, especially given that inflation growth keeps underperforming. Inflation growth decelerated to 4.7% YoY in June and – thanks to low agricultural prices and the strong rouble – is headed towards 4.0% by year-end 2019, which is lower than the recently updated CBR forecast range of 4.2-4.7%.

We believe the central bank will highlight the reasons for the current slowdown in inflation are not on the demand side, but rather a result of favourable external inputs – to avoid misinterpreting a rate cut as a means to boost activity. For now, we see the terminal key rate at 6.5% to be reached in mid-2020.

We don’t expect anything from the National Bank of Hungary when the rate-setters are going to meet. Last time they highlighted that they are ready to wait-and-see in 2H19 and we don't see any reason why this view should change after just a month. Against this backdrop, we see this meeting as a non-event with unchanged rates and no forward guidance.