Key events in EMEA and Latam next week, from 3 November

Despite a hawkish tilt of the last September Czech National Bank's (CNB) meeting, we still believe that stability of rates is more likely outcome next week, despite the fact that the new forecast will remain relatively hawkish and recommend to hike and also ex-CNB Chief economist and new board member Tomas Holub mentioned 50 percentage chance he will vote for a hike next week. However, foreign uncertainty remains elevated and also deceleration of September CPI to 2.7% might bring some comfort to those Board members, who were more concerned of hitting 3% upper tolerance band. As such, majority of Board members will support stability of rates, in our view. Even vice-governor Marek Mora, backing the hike in September, said that his vote is not certain. Also, O. Dedek and also Governor Rusnok see stability of rates more likely, after balancing all pros and cons. As such, on hold decision is more likely, despite new forecast might remain quite optimistic.

With inflation floating around the 3.50% upper point of the central bank’s inflation target band, and fiscal consolidation delayed by the electoral agenda, there is not much the National Bank of Romania can do but to keep things in check for a while. We see the key rate flat at 2.50% until the end of 2020.

We expect a continuation of the inflation downtrend in October, pulling the annual figure to 8.9% (2.3% month-on-month) from 9.3% thanks to easing in cost-push factors, TRY stabilisation and still relatively weak demand. The trend will change direction in the last two months of the year because of unsupportive base effects.

Hungary will face a busy calendar next week. We expect to see the activity indicators (both soft and hard) to show some improvement. Industrial production will jump significantly on last year’s low base, while retail sales are expected to maintain the positive momentum as the labour market remains strong. The highlight of the week is the October inflation reading. We see a drop in the year-on-year headline CPI on non-core items (mainly on fuel and raw food). Despite a 0.2% MoM increase in core CPI, the high base will drag down the YoY reading.

The next monetary policy committee meeting is unlikely to bring material news for monetary policy. The National Bank of Poland (NBP) will publish its new November inflation projections. According to recent comments by Governor Glapiński, it should bring minor downward revisions to GDP growth and upward ones to inflation. The central bank’s staff projections are likely to present CPI below the 3.5% YoY threshold in the first quarter of 2020 and return towards the inflation target in the second half of 2020.

The recent weekly data suggests Russian CPI is likely to decelerate from 4.0% YoY in September to 3.7-3.8% in October. Global agriculture prices are declining, the ruble is stable, the government is struggling with executing its annual spending plan, while the population is returning to a savings-mode.

The current slowdown is mostly accounted for by the Bank of Russia, which has recently cut the key rate by 50bp, taking the level to 6.5%. It also lowered the year-end 2019 CPI forecast to 3.2-3.7%. A further cut at the upcoming December meeting is possible if CPI approaches the lower end of the forecast range, which is becoming increasingly likely.