Key events in EMEA next week

Poland: central bank decision on rates
In recent public statements, Polish policymakers have stressed the need for further monetary tightening, albeit on a lesser scale than before. Rate setters mostly mentioned a 25 basis point rate hike and some even seemed reluctant to any hike. An August flash CPI upside surprise means a 25bp rate hike to 6.75% (our base case) looks like a done deal and the Board could even discuss a rate hike. rate of 50 bps. Yet, the end of the rate hike cycle is approaching and we currently see the National Bank of Poland terminal rate at 7.0-7.5%.

Russia: Inflation ebbs after a big spike
After surging to 17.8% year-on-year in April, Russia embarked on a disinflationary path due to weaker demand, ruble appreciation and a good harvest. Next Friday’s CPI figures for August are expected to show prices falling 0.6% month-on-month and the annual rate decelerating to 14.2% year-on-year. This challenges our year-end expectation of 13% and suggests that actual printing is likely to be at the lower end of the Bank of Russia’s 12-15% range. This means that the key rate, which has already been lowered from 20.0% in February-March to 8.0% in July, may fall further. However, with household inflation expectations stabilizing and the unclear supply-side outlook, we expect the CPI to remain elevated next year and doubt that this policy rate cut will exceed 100 basis points. basis by the end of the year. The next meeting of the Central Bank of Russia is scheduled for September 16.

Turkey: Annual inflation is expected to rise further
We expect annual inflation to have risen further in August to 81.6% (2.2% on a monthly basis) from 79.6% a month ago, despite lower oil prices. gasoline, as price pressures are likely to remain widespread with a broadly supportive policy framework leading to currency weakness and external factors weighing on import prices.

Hungary: core inflation in August should be 18.6%
We face a very busy schedule in Hungary next week. The first set of data will be economic activity for July. Retail sales may improve a bit as pensioners received additional transfers from the government, which is practically a retroactively increased pension due to higher than expected inflation. This could boost food consumption, while non-food retailing has been boosted by the new (less supportive) utility bill support scheme, which has urged households to replace older appliances with newer ones. and more energy efficient.

Based on the PMI data, industrial production for July could still be okay, although we see downside risk here due to the expected summer shutdowns. While the industry is doing well despite the plethora of challenges, the trade balance is rather driven by the country’s ever-increasing energy bill, and we are therefore witnessing a further deterioration of the trade deficit in July.

The highlight of the week will be the August inflation reading. Due to a refined fuel price cap, which reduced the range of beneficiaries, the Statistical Office will recalculate the higher fuel price in the consumption basket (weighted average of capped and market prices). That could explain 0.9-1.0 ppt of the 2.3% month-over-month inflation, which will take the annual reading to 16.2%. As higher energy and agricultural commodity prices feed through to processed food and service providers adjusting their prices to higher utility bills, we forecast underlying inflation of 18.6 % year-on-year. However, there is one beneficiary of this sky-high inflation environment: the government budget, where we expect another surplus on rising incomes in August.

Kazakhstan: higher-than-expected inflation calls for a further hike in key rates
The National Bank of Kazakhstan is expected to raise its key interest rate again on Monday from the current level of 14.50% to 15.00% or more. After the last hike of 50 basis points at the end of July, inflation continued to outperform the market and NBK’s expectations, reaching 16.1% year-on-year in August. The rise in inflationary pressures appears structurally generalized and most likely calls for an adjustment in the level of key rates.
Source: ING

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