Expect a data heavy week in EMEA and Latam next week, combined with a sprinkle of central bank action from Serbia and Romania
We expect the National Bank of Romania (NBR) to hike the key rate by 25bp to 2.50% on 7 May as political pressures subside. With inflation inching higher and a likely upward revision in the short-term inflation profile, after recent upside surprises, the NBR cannot afford the credibility cost of doing nothing. Firm liquidity management, though not committed, already tightened the policy stance significantly and this hike might be followed by a long data dependent pause.
In Serbia, inflation stands below the National Bank of Serbia's (NBS) target band and the RSD firming pressures prompted central bank intervention to curb them. The above expectations of 1Q18 GDP growth might play against NBS plans to ease further, through another key rate cut 25bp to 2.75% accompanied by the narrowing of the standing facilities corridor to +/-100bp, which offsets most of the easing in the context of surplus liquidity is the most likely scenario in our view.
Bank of England expected to hold whilst US data puts the Fed on course for a June rate hike, but what else is going on in developed markets next week?
The positive write-up on the US economy within the Federal Reserve’s FOMC statement coupled with firm inflation readings that have been posted over the past month (look for another rise in CPI this week) all point to a June interest rate rise.
Another strong April jobs report, seeing unemployment fall to a new 18-year low and wages remaining on a gradual upward trend should reinforce those market expectations, which currently give it a 90% chance of happening. It would also offer support to our own forecasts of two additional hikes after the June move. The commentary from Federal Reserve officials suggests a growing sense that tighter monetary policy is required and we expect this message to continue given several regional Fed President and Governors are slated to speak.
It’s an eventful week in Asia, as Malaysians decide the fate of incumbent Prime Minister Najib Razak, the Philippines gets set to tighten rates and US-China trade talks either reduce or refuel risks to the region's export-led growth
China’s activity data for April will shed light on the economy’s performance coming into the second quarter of the year, while the trade war clouds the outlook. After underperforming in 2017, China’s exports have performed well so far this year. The 13% year-on-year export growth in 1Q18 was the third best after Vietnam and Malaysia. The consensus of 8% growth in April indicates some tapering of the strength.
Will the US Treasury Secretary's mission to China bear fruit? There is scepticism stemming from President Trump’s “walk out” threat if talks don’t move in the US's desired direction. Hopefully, we should have some clarity on this before the weekend. The outcome of trade talks, rather than hard data, will set the tone for both Chinese and global markets in the coming week.
Hong Kong GDP for 1Q18 and Taiwan trade and inflation are other data releases from Northeast Asia.
Discover what ING analysts are looking for next week in our global economic calendars