Emerging Market Central Bank Meetings Continue this Week

EM starts the week on an uncertain footing. Commodity prices were off sharply until comments by Saudi Arabia lifted them, reversing the trend in commodity-sensitive property. The dollar is also back again on the rise, pressuring EM FX even while a December FED backpack is now just about fully listed in. In South America, the actual victory of the market-friendly candidate within Argentina and better political winds within Brazil have also given the area some hope for the near term, which could help sentiment more broadly.

South Africa reports Q3 GDP Tuesday, and expects it to grow 1.3% y/y versus. 1.2% in Q2. The SARB rate hike last week will be an additional headwind on the economy, and occurs top of fiscal tightening too. We think risks to development are on the downside. The big real question is how much more the SARB can tighten up in the coming months?

Turkey’s central bank meets Wednesday and expects it to keep rates steady at Seven.5%. Unfortunately, President Erdogan is once more talking about monetary policy. After being surprisingly quiet during the election period, he is once more pressuring the central bank to ease, despite Turkey’s chronic rising cost of living problem. He called for the financial institution the cut rates to closer to historical lows of 4.5%, from back in 2013. Risks to central bank self-reliance in Turkey have been an adverse factor in market confidence for some time, and it doesn’t look to be getting any better.

Mexico reports mid-November CPI Tuesday, and expects it to rise 2.48% y/y. October trade will be documented Friday. Q3 GDP came in stronger than expected, up Two.6% y/y vs. 2.4% consensus along with a revised 2.3% (was 2.2%) in Q2. Some may look for a possible Banxico rate hike at the next meeting December 17, which is a day after the FOMC meeting and likely Fed lift-off. We think it is unlikely, as officials seem to be tilting a little more dovish lately. More appear to want to see the impact of a Fed hike before deciding on South america rates.

Brazil’s COPOM meets Wednesday and expects to keep rates steady at 14.25%. Earlier in the day, it reviews October PPI. Brazil then reports October current account and FDI on Thursday. November IGP-M wholesale inflation will be documented Friday, and we expect it to rise 10.66% y/y vs. Ten.09% in October. Pipeline cost pressures are still building, and will keep upward pressure on consumer prices as well.

The Philippines reports Q3 GDP Thursday, and that we expect it to grow Six.3% y/y vs. 5.6% in Q2. The country appears to be avoiding the downturn that most in the region are experiencing. Rising cost of living was 0.4% y/y in Oct, well below the 2-4% target variety. However, there are upside dangers to inflation due to El Nino, and thus we think monetary policy seems balanced right now.

Singapore reports October IP Thursday, and wants it to be -4.9% y/y vs. -4.8% in Sept. The data continue to come in gentle, and so we expect the actual MAS to ease again at its next policy meeting within April. We would not rule out an intra-meeting move, as it do this January.

Colombia’s main bank meets Friday and expects to hike rates 50 bp to 5.75%. This would follow a larger than expected Fifty bp hike last month. Nevertheless, the market is somewhat split. Of the 18 analysts polled through Bloomberg, 11 see a 50 bp hike, 6 see a Twenty five bp hike, and 1 sees no hike. Inflation continues to move higher. At 5.9% y/y in October, it’s the highest since March 2009 and above the 2-4% range for that ninth straight month. As such, further tightening seems most likely as we move into 2016.

Emerging Markets: Examine of the Week Ahead is republished along with permission from Marc to Market