The double whammy of a still uncertain geopolitical backdrop and falling oil prices is likely to remain the main driving force for Russian markets amid the rather light calendar this week. We expect only the regular weekly CPI report, which might reveal a further pickup in headline CPI to 8.3% YoY on the back of mounting food inflation pressures.
In Turkey, we and the Bloomberg consensus anticipate an on-hold decision, with the benchmark rate to remain unchanged at 8.25% as the tight monetary policy stance will likely be maintained until there is a significant improvement in the inflation outlook. However, the worse the economic environment gets and the more benign core inflation becomes (thanks to macroprudential measures taken at the beginning of the year and the hawkish monetary policy), the more pressure from the government is likely to be seen (to recap, the regulator lowered rates in April-August).
Elevated inflation in South Africa is likely to subside in the coming months, with CPI growth already seeming to have eased to 6.1% YoY in September, from 6.4% YoY in August. Downward pressure on both food and energy prices (especially, petrol) will likely offset the inflationary impact from the weaker rand. At the moment, the SABR forecasts that inflation is to average 6.2% in 2014 and 5.7% in 2015, and to return to within the target range in the first quarter of 2015. The risks are skewed to the upside, with the major one being related to the renewed pressure on prices from the exchange rate.