Key events in EMEA and Latam next week

The Bank of Russia is likely to keep its key rate unchanged at 7.5% at the 26 October meeting, as the CPI rate- having shown some acceleration to 3.6% YoY as of mid-month- is so far on track to stay within the recent official guideline of 3.8-4.2% for year-end and 5.5-6.0% year-on-year for the first half of next year.

The communique is likely to be focused on the monetary authorities’ assessment of the inflationary risks amid external uncertainties and preparation for the two percentage point VAT rate hike in 2019. The wording could affect expectations for the December meeting, as the market is starting to assign more probability to another hike two months from now.

With the ongoing strengthening in Turkey's lira on the back of Pastor Brunson’s release as well as signs that the US could lift some sanctions on Turkey and a more conciliatory tone on Turkey’s oil purchases from Iran ahead of the reimposition of sanctions next month, there is increased optimism that geopolitical risk for Turkey is improving.

We expect the Turkish central bank to keep its policy rate unchanged at the October meeting. Though given the marked deterioration in price-setting behaviour, as observed by the big inflation surprise and forward-looking expectations, a further adjustment in monetary policy should not be ruled out.

Next week is relatively quiet in Poland. Budget data should attract less attention compared to previous months. The surprising fall into deficit in July was corrected in August, and as a result, the overall balance returned to a moderate surplus. We expect September data to follow the typical seasonal pattern.