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Macro week ahead

Tomorrow, there are due to be monetary policy decisions from the central banks of both Turkey and Hungary. We shall also obtain the last monthly CPI report for June in our CEEMEA universe, with South Africa releasing its estimate. On Wednesday, there is the regular release of the weekly CPI data in Russia, with retail sales for June in Poland on Tuesday.

In Russia, the only interesting release is the weekly CPI reading, which is likely to bring further evidence of headline disinflation due to the favourable base effect in food prices. The headline CPI for July as a whole is set to slide very close to the upper boundary of the CBR’s target range (to 6.3-6.4% YoY).

In Turkey, CBRT Governor Erdem Basci promised to deliver a ‘measured step’, which is typically associated with a 50bp move. However, such a move up only in the upper boundary of the interest rate corridor would disappoint the market, which is already expecting an increase of at least 75bp. For a policy change to have an effect on the FX market, a longer lasting, bolder step is needed. That is why we expect a 100-150bp hike in the upper boundary, bringing it to 7.5-8.0%. All other rates are to be left unchanged, in our view.

Hungary is likely to continue its easing cycle, with another 25bp rate cut, as the economy/inflation mix allows the MPC to act more.

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

CPI, CBR, FX market

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