3 August 2018
Key events in EMEA in Latam next week

Central bank decisions from Romania and Serbia, inflation data from Hungary and unemployment figures from the Czech Republic are among the highlights next week  

Hungary's industrial production set to show positive signs

In Hungary, we expect industrial production to show some promise despite the start of the holiday season in June. But the real fireworks are likely to come in July, which was when Audi finally started production of electric vehicles. As EU funds are still not coming from the bloc, we expect the budget balance to remain deeply in negative territory. However, the highlight of the week comes on Wednesday, 7 August with the July CPI reading when we'll see another jump in fuel prices and therefore project headline CPI to accelerate to 3.3% year-on-year, a new five-year peak.

Key events in developed markets next week

In developed markets next week, we are looking for strong US data releases to cement expectations for the Fed to hike rates again in September. Industrial production in Germany may shed some light on the ongoing trade tensions and we expect subdued core inflation readings from Norway and Sweden 

Spotlight on September

The forthcoming data is likely to cement expectations for the Federal Reserve to raise interest rates again at the 26 September FOMC meeting. With the economy having expanded 4.1% in 2Q and this week’s inflation report set to show headline CPI ticking up to 3%, with core CPI (excl. food and energy) remaining at 2.3%, the case for higher interest rates is robust.

At the same time, the jobs market is going from strength to strength with payrolls set to rise by close to 200,000 yet again. Wages should also move higher and unemployment could drop back below 4%, which should help underpin consumer spending growth in the second half of the year.

Asia week ahead: Philippines rate hike in view

Australia, New Zealand, Thailand and the Philippines hold central bank meetings next week but the Philippines will be the one to watch. Meanwhile, China’s July trade data should provide a glimpse into the trade war impact 

A double-barrel tightening by Philippines' central bank

Central banks in Australia, New Zealand, Thailand and the Philippines all hold their monetary policy meetings next week, but a broad consensus forecast for no change in rates by the first three, make these non-events.

We think the Philippines central bank meeting next Thursday (9 August) will be the most significant. Coming in just ahead of the meeting will be the July inflation figures and GDP for the second quarter, which are likely to play a key role in the decision.

Rising inflation and the weak currency were triggers for the two 25 basis point rate hikes in May and June. Of these, the second factor has somewhat faded recently; not only has the peso stabilised in sync with emerging FX, but the 0.4% appreciation against the US dollar over the last month was also the most among Asian currencies. However, rising inflation remains a tailwind for higher rates, and that's getting even stronger.

Inflation surged past the central bank’s 4.3 - 5.1% forecast range to 5.2% year-on-year in June. Our Philippines economist, Joey Cuyegkeng, sees it jumping further to 5.4% in July and thinks it's unlikely to stop there. Higher minimum wages, transport fares, elevated fuel prices, income tax reforms, and the weaker currency are all likely to sustain the upward trend for the remainder of the year. And in our view, this requires more aggressive policy action. 

We forecast steady, strong GDP growth of 6.7% YoY in the second-quarter - barely moving from 6.8% in 1Q and we think this provides scope for a 50 basis point hike rather than the standard 25 basis point move.

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Our view on next week’s key events

Discover what ING analysts are looking for next week in our global economic calendars

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