Key events in EMEA and Latam next week

With the global outlook darkening and rhetoric from the Federal Reserve and European Central Bank becoming increasingly dovish, there is little chance that the National Bank of Hungary (NBH) will change its loose monetary policy stance for now. The Inflation Report, which will be released along with the rate decision, may contain higher inflation forecasts for 2019 - though probably not high enough to make the NBH hike rates.

Average wages have been increasing rapidly in the last two years on the back of a tight labour market. Economic activity is outperforming previous expectations, generating even higher demand for labour. We therefore expect wage growth to remain strong going forward.

On the other hand, we expect a significant drop in the PPI - mostly due to lower oil prices, which is slightly counterbalanced by other factors.

Real economic data in the Czech Republic surprised slightly on the positive side in the last few months and inflation surpassed the Czech National Bank’s (CNB) expectations somewhat, coming close to its upper-tolerance band in May, at 2.9%. Still, global uncertainty remains elevated due to concerns about the trade war and a weaker outlook for global economic growth, which has turned major central banks dovish (again). In such an environment, especially with Czech inflation near-target in the monetary policy horizon, a ‘wait and see’ approach seems to be the best strategy for the CNB right now.