![Emerging Market Preview for the Week Ahead](https://snbchf.com/wp-content/uploads/2016/05/global.jpg)
Several EM central banks meet this week, including Israel, Turkey, Hungary, and Colombia. There is some risk of a dovish surprise from Turkey, while Hungary is expected to continue easing. Colombia is an outlier, with high inflation seen leading to another 25 bp hike.
Singapore reports April CPI Monday, which is expected at -0.7% y/y vs. -1.0% in March. It then reports April IP Thursday, which is expected at -0.3% y/y vs. -0.5% in March. Deflation risks may be easing, but the economy continues to slow. If weakness persists over the summer, then another easing move at the October MAS policy meeting is possible.
Taiwan reports April industrial output Monday, which is expected at -1.8% y/y vs. -3.6% in March. Last week, Taiwan reported April export orders at -11.1% y/y, which suggests little relief ahead for IP and exports. The growth outlook remains weak, and so the central bank is likely to continue cutting rates at its quarterly policy meeting in June.
Israeli central bank meets Monday and is expected to keep rates steady at 0.10%. Deflation worsened to -0.9% y/y in April, while Q1 GDP growth was much weaker than expected at 0.8% annualized. As such, there is growing risk that the Bank of Israel will have to take further measures in H2 to boost the economy. For now, officials will be happy with recent shekel weakness. The central bank had been intervening to prevent strength in recent months, but the shekel has underperformed recently due to rising political risks.
Turkish central bank meets Tuesday and is expected to cut the overnight lending rate 50 bp to 9.5%. However, the benchmark rate is seen remaining steady at 7.5%. Price pressures are easing and so there is a case for easing policy. However, the government should refrain from any sort of jawboning.
Hungarian central bank meets Tuesday and is expected to cut rates 15 bp to 0.90%. While officials have been downplaying the likelihood of further easing, we think there will be one more 15 bp cut at the June 21 meeting to 0.75% before we see another pause. Q1 GDP growth came in much weaker than expected, at 0.9% y/y.
Mexico reports mid-May CPI Tuesday, which is expected to rise 2.7% y/y vs. 2.6% in mid-April. It then reports April trade and Q1 current account data Wednesday. Banco de Mexico also releases its quarterly inflation report Wednesday. Last week, it cut its 2016 growth forecast range to 2.2-3.2% from 2.6-3.6% previously. We downplay risks of an imminent rate hike, as price pressures remain low despite the weak peso.
Brazil reports April current account data Tuesday. The ongoing recession has led to a collapse in imports that has more than offset the downturn in exports. FDI has held up well, so the portion of the current account gap that must be covered by hot money has fallen significantly. That said, Brazil’s Vale warned last week of a negative outlook for iron ore due to supply concerns.
Polish central bank releases minutes on Friday. Despite concerns that the new MPC would be really dovish, the bank has keep rates steady all year. A new central bank chief (Glapinski) will be in place next month, and markets will be watching to see how dovish he leans. On Friday, he said borrowing costs are at the “right” level and that further easing would pose risks to financial stability.
Colombian central bank meets Friday and is expected to hike rates 25 bp to 7.25%. However, the market is split. Of the 19 analysts polled by Bloomberg, 2 see a 50 bp hike, 12 see a 25 bp hike, and 5 see no hike. CPI rose 7.9% y/y in April, well above the 2-4% target range and justifying another rate hike. Finance Minister Cardenas shows little concern about a weaker peso, though it poses some upside risks to inflation.
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