BUDAPST: EM ended last week on a firm note, helped by the weaker than expected US Q2 GDP report as well as the small bounce in oil. With the RBA and BOE expected to ease this week, the global liquidity backdrop remains favorable for EM and “risk.” US jobs report Friday will be very important for EM going forward.
We get our first glimpse of the Chinese economy for July with the PMI readings this week. EM CPI data this week should underscore the low global inflation theme. More EM central banks are likely to join the easing parade in H2.
Hungary reports June retail sales Wednesday. It then reports June IP Friday. The real sector remains robust, but deflation risks persist. Further easing, if needed, will likely take the form of unconventional measures instead of rate cuts. The next policy meeting is August 23, no changes are expected then.
Turkey reports July CPI Wednesday, which is expected to rise 8.11% y/y vs. 7.64% in June. This remains well above the 3-7% target range. Yet the central bank is likely to come under greater pressure to ease, as Erdogan consolidates control after the failed coup attempt. Next policy meeting is August 23.
Czech National Bank meets Thursday and is expected to keep rates steady at 0.05%. Czech Republic then reports June retail sales Friday, which are expected to rise 7.6% y/y vs. 11.1% in May. The real sector remains robust, and so the central bank’s forward guidance is likely to remain steady for now.
Taiwan reports July CPI Friday, which is expected to rise 1.1% y/y vs. 0.9% in June. Even though the central bank does not have an explicit inflation target, low price pressures should allow it to continue easing with another 12.5 bp cut in late September.
The Philippines reports July CPI Friday, which is expected to rise 2.1% y/y vs. 1.9% in June. This remains right at the bottom of the 2-4% target range. After the central bank shifted to a new interest rate corridor and cut the policy rate to 3% in May, we think further easing (via a cut in the policy rate and/or in reserve requirements) seems likely in H2. The next policy meeting is August 11.
Malaysia reports June trade Friday. Lower oil prices will continue to weigh on the economy. Real sector data have been softening, which helps explain the central bank’s surprise 25 bp rate cut to 3.0% in July. The next policy meeting is September 7, and we think another cut is possible then.
Colombia reports July CPI Friday, which is expected to rise 8.77% y/y vs. 8.6% in June. This is further above the 2-4% target range. Last Friday, the central bank hiked rates 25 bp to 7.75%. The next policy meeting is August 31, and the bank may be forced to hike again if the inflation trajectory does not improve.
