EM Central Banks

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May 24, 2024

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Banxico Minutes: Unanimous Pause, Diverging Cuts
Paying Article

May 24, 2024 9:24 PM UTC

Banxico maintained the policy rate at 11%, reflecting a cautious stance amid persistent inflation and economic uncertainty. The board was unanimous in this decision but divided on the timing of future cuts. Despite expectations for a rebound in economic activity, concerns about inflationary pressure

May 23, 2024

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As Expected, CBRT Kept Key Rate Unchanged at 50%
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May 23, 2024 7:30 PM UTC

Bottom Line: As predictions were centred around no change, Central Bank of Turkiye (CBRT) kept the policy rate stable at 50% on May 23 despite galloping inflation which edged up to 69.8% in April, up from 68.5% in March. CBRT said in a statement on May 23 that "(...)considering the lagged effects of

May 22, 2024

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Argentina: Fourth Consecutive Month of Primary Surplus but It is Reducing
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May 22, 2024 2:44 PM UTC

Argentina has delivered the fourth consecutive months of primary surplus. Most of this surplus comes from cutting the consumption of goods and services by the national administration and mainly by the pace of revenues growth which surpassed the growth of expenditures. However, the surpluses are redu

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Bank Indonesia Holds Firm on Rates: A Steady Hand for Currency Stability
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May 22, 2024 9:29 AM UTC

Bank Indonesia in a pro-stability move decided to maintain the key policy rate at 6.25% today. The move comes at a time when the wakness in the Indonesia Rupiah has abated and headline inflation has edged down. Despite improving stability, a rate cut is not in sight in the near term. 

May 20, 2024

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Mexico: Exports Loosing Traction
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May 20, 2024 2:38 PM UTC

At the beginning of the year, Mexico's exports are losing traction, stagnating as imports surpass exports. This could be due to adjustments to U.S. demand and inflation effects. With internal demand cooling and the U.S. economy decelerating, growth may shift to Mexico’s internal economy, bolstered

May 15, 2024

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Argentina CPI Review: Monthly Inflation Drops to One Digit
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May 15, 2024 12:18 PM UTC

Argentina's April CPI dropped to 8.8% after six months above 10%, with Y/Y CPI at 289%. Key rises included housing (+36%) and communication (+14.2%). Javier Milei's program and fiscal adjustments have reduced monetary emissions to zero, easing inflation. The Central Bank cut the policy rate to 40%.

May 14, 2024

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India Inflation Review: Sticky Prices to Keep RBI Cautious
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May 14, 2024 3:54 AM UTC

India’s consumer price inflation eased amrginally to 4.83% yr/yr in April, reflecting lower fuel and light prices. The government cut prices of LPG cylinders in India ahead of the elections. However, food price pressures persist despite various supply side measures, underscoring the sticky nature

May 10, 2024

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Banxico Review: Hold Rates
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May 10, 2024 12:44 PM UTC

Banxico's decision to maintain the policy rate at 11% reflects a cautious stance amidst rising inflation and a slowing economy. Despite external volatility, the MXN remains resilient. The main concern is services inflation being stickier. With a revised inflation forecast indicating a longer period

Benign Inflation Allows BNM to Hold Rate
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May 10, 2024 9:24 AM UTC

In its latest decision, the Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) opted to keep the overnight policy rate (OPR) steady at 3.0%, marking the seventh consecutive meeting without a change. This decision aligns with market projections and underscores BNM's commitment to support g

May 09, 2024

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Mexico CPI Review: 0.2% Growth in April
Freemium Article

May 9, 2024 6:11 PM UTC

April's CPI data, despite a 0.2% m/m growth, reveals a significant y/y uptick to 4.6% from March's 4.4%, challenging norms due to electricity tariff adjustments. Core CPI maintained stability with a 0.2% increase, while Core Goods CPI rose by 0.3% and Services CPI by 0.1%, accumulating a 5.2% y/y gr

May 07, 2024

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Banxico Preview: Continuing at 25bps
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May 7, 2024 12:43 PM UTC

Banxico will convene on May 9 to decide on the policy rate, having initiated a possible cutting cycle. Despite concerns, the MXN remains stable. The 25bps adjustment aims to maintain tight monetary policy while mitigating inflation. The board may split over this decision, but Banxico is likely to co

May 03, 2024

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EMFX: Diverging On Domestic Forces Not Less Fed Easing Hopes
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May 3, 2024 10:45 AM UTC

While U.S. economic developments, plus Fed policy prospects, will be important in terms of EM currency developments, domestic politics and fundamentals will also be decisive. These can keep the South Africa Rand volatile in the remainder of 2024, given the risk of a coalition government and African

Indonesia CPI Review: Inflation Inches Down but BI on Alert
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May 3, 2024 10:33 AM UTC

Indonesia’s consumer price inflation eased marginally to 3% yr/yr in April on the back of declining food prices. Despite the easing, food price remain the key inflationary factor. Additionally, imported inflation as the IDR comes under pressure could keep inflation elevated in the near term. Bank

May 02, 2024

Moody’s Improves Outlook Perspective Due to Higher Growth
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May 2, 2024 2:27 PM UTC

Moody’s upgraded Brazil's outlook to positive from stable, maintaining its Ba2 rating, signaling a potential move to Ba1 soon. Strong growth prospects, attributed to institutional reforms, drove this shift. Despite lingering doubts, improved fiscal conditions and anticipated tax reform are bolster

April 30, 2024

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Mexico GDP Review: 0.2% Growth but Still Subpar
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April 30, 2024 5:54 PM UTC

INEGI released Mexico's Preliminary GDP for Q1 2024, showing 0.2% growth, slightly above expectations. Annual GDP slowed to 2.0% from 2.8% in Q4 2023. The economy is losing momentum due to tight monetary policy and weakened U.S. demand. Agriculture contracted by 1.1%, Industry by 0.4%, while Service

April 29, 2024

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Mexico GDP Preview: Stagnation in the First Quarter
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April 29, 2024 5:22 PM UTC

INEGI will release Mexico's Preliminary GDP data, indicating 0% growth in Q1, likely due to stagnation in key sectors like manufacturing and construction. The service sector, hit hard by the pandemic, also shows signs of sluggishness. While recovery is expected, sustained poor growth raises concerns

April 26, 2024

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Argentina: Activity is Shrinking but that is the Price to Stabilize
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April 26, 2024 5:52 PM UTC

The INDEC data for February reveals a 0.2% economic shrinkage, signalling a 5.1% drop since August 2023, potentially leading to a Q1 2024 recession. High inflation and fiscal adjustments are primary causes. Some foresee 0% April inflation due to price realignment and stable ARS. Despite low reserves

April 25, 2024

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CBRT Kept Key Rate Unchanged at 50%
Paying Article

April 25, 2024 3:25 PM UTC

Bottom Line: As predictions were centred around no change, Central Bank of Turkiye (CBRT) kept the policy rate stable at 50% on April 25 despite galloping inflation, and pressure on FX lately. According to the CBRT statement, monetary policy stance will be tightened in case a significant and persist

April 24, 2024

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Brazil: Wage Inflation Will Likely Not Be a Big Deal
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April 24, 2024 3:19 PM UTC

Our analysis delves into recent trends in the Brazilian labor market, focusing on CPI and wage inflation. Utilizing a model akin to Ghomi et al. (2024) and Blanchard and Bernanke (2023), we dissect recent spikes in wage inflation and CPI growth. Notably, our findings suggest that recent wage spikes

April 23, 2024

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Indonesia: MPC Preview: Bank Indonesia to Hold Rate Despite Currency Volatility
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April 23, 2024 11:12 AM UTC

With inflation within target range and the need to defend the currency amid global uncertainties and US dollar strength, Bank Indonesia (BI) is likely to extend its pause on rate adjustments in the upcoming monetary policy meeting on April 24. BI remains committed to stabilising the Indonesian rupia

April 22, 2024

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Indonesian Court Delivers Verdict: Prabowo prevails
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April 22, 2024 3:18 PM UTC

The Constitutional Court dismissed cases against Vice President Gibran Rakabuming Raka and President Joko Widodo. In Gibran's case, the court didn't disqualify him from running for president but sanctioned the election committee for not amending regulations following a previous ruling. This ruling l

April 18, 2024

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Brazil: Revision of Targets Shows the Weakness of the New Fiscal Framework
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April 18, 2024 1:39 PM UTC

The Brazilian government has revised its budget targets for 2025 and 2026, lowering the deficit to 0% and a 0.25% surplus in 2025 and 2026 respectively, from 0.5% surplus in 2025 and 1% in 2026. However, reliance on revenue increases poses challenges amid resistance from Congress. Despite reduced ta

April 17, 2024

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Markets: Fed Rather Than Middle East Worries
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April 17, 2024 12:34 PM UTC

Global markets are being driven by a scale back in Fed easing expectations and we see a 5-10% U.S. equity market correction being underway.  However, with the market now only discounting one 25bps Fed cut in 2024, any downside surprises on U.S. growth or better controlled monthly inflation numbers

April 16, 2024

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China: Q1 Upside Surprise, but March Disappoints
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April 16, 2024 8:33 AM UTC

Q1 GDP upside surprise was driven mainly by public sector investment.  With the government still to implement the Yuan 1trn of special sovereign bonds for infrastructure spending, public investment will likely remain a key driving force.  However, the breakdown of the March data show that retail s

April 14, 2024

Argentina CPI Review: Small Improvements Amid the Uncertainty
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April 14, 2024 1:26 PM UTC

The INDEC's March CPI data reveals an 11.0% increase, down from February's 13.2%. Annually, Argentine CPI rose by 287% (Y/Y), with core CPI below 10%. Despite past shocks, we foresee continued monthly CPI slowdown. Argentina focuses on fiscal measures and on stabilize the exchange rate to accumulate

April 09, 2024

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Mexico CPI Review: Slightly Below Expectations, with Concerns in Service
Freemium Article

April 9, 2024 6:43 PM UTC

Mexico's March CPI data, released by the National Statistics Institute, shows a slight increase of 0.29%, below the 0.36% expectation. Year-on-year CPI remains stable at 4.4%, above Banxico's 3.0% target. While fruit and vegetable prices dropped, transport costs rose. Concerns arise with Services CP

April 08, 2024

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Mexico CPI Preview: Well Behaved March
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April 8, 2024 1:10 PM UTC

On April 9th, Mexico's National Institute for Statistics will release March's CPI data. Forecast suggests a 0.4% rise, keeping YoY CPI stable at 4.5%, mainly due to base effects. Core CPI likely to remain steady at 4.5%, showing progress in disinflation despite non-alignment with Banxico's 3.0% targ

April 05, 2024

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Banxico Minutes: Hawkish Cut and Different Views
Paying Article

April 5, 2024 2:18 PM UTC

Banxico's recent meeting minutes reveal a split among board members regarding monetary policy, with a 25bps rate cut to 11.0%. Despite progress in curbing inflation, differing views on policy direction persist. Inflation expectations deviate from targets, with potential risks in fiscal policy and wa

April 03, 2024

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Brazil: What About the Fiscal?
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April 3, 2024 2:31 PM UTC

In 2023, Brazil witnessed a significant fiscal decline, with the GDP surplus of 0.5% in 2022 turning into a 2.1% deficit, surpassing the targeted 0.5% deficit set by the new fiscal rule. Despite measures aimed at reinstating fiscal sustainability, immediate adjustments are unlikely. The deterioratio

April 02, 2024

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Asset Allocation: Pausing for Breath
Paying Article

April 2, 2024 9:00 AM UTC

Into Q2, data and policy (actual and perceived) will dominate DM markets. The ECB will likely take the spotlight with a 25bps cut on June 7, as the Fed face a better growth/more fiscal policy expansion and a tighter labor market than the EZ but also with a better productivity backdrop and outlook to

April 01, 2024

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Indonesia CPI Review: Ramadan Demand Drives Up Inflation
Paying Article

April 1, 2024 1:33 PM UTC

Indonesia's latest Consumer Price Index (CPI) data has revealed a notable acceleration in inflation, surpassing expectations and marking the highest rate since August 2023. The surge, driven primarily by heightened demand during the fasting month of Ramadan, highlights significant price pressures ac

March 27, 2024

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Beware of Inflation: SARB Held the Key Rate Stable at 8.25%
Paying Article

March 27, 2024 3:26 PM UTC

Bottom line: As widely expected, South African Reserve Bank (SARB) kept the key rate constant at 8.25% on March 27. It appears the decision targeted to anchor inflation expectations around the target midpoint, and enhance confidence in achieving the inflation goal as SARB signalled that its fight to

March 26, 2024

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EM FX Outlook: Domestic Drivers Key
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March 26, 2024 9:01 AM UTC

   In terms of spot EM FX projections domestic drivers remain critical, with a desire to avoid appreciation versus the USD for some countries.  Fed easing in H2 2024 should however help EMFX more broadly and allow some recovery in spot rates (e.g. Indonesian Rupiah (IDR), South African Rand (ZAR)

March 25, 2024

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EMEA Outlook: Elections Set the Scene in Q2
Paying Article

March 25, 2024 2:00 PM UTC

·     Unlike South Africa and Russia, Turkiye continued with tightening monetary policy in Q1 due to stubborn inflation, pressure on FX and reserves. Meanwhile, Russia and South Africa halted their tightening cycles as of 2024 and will likely start cutting interest rates in Q3 depending on how

March 22, 2024

LatAm Outlook: Getting Deeper in the Cutting Cycle
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March 22, 2024 7:04 PM UTC

·       Brazil and Mexico growth will decelerate from the growth rates seen in 2023. The stronger basis of comparisons in 2023 and the tight monetary policy will diminish growth during 2024. Brazil robust agricultural growth will not repeat in 2024, while Mexico growth is restrained by a tigh

March 21, 2024

Banxico Review: 25bps Cut but not Unanimously
Paying Article

March 21, 2024 9:09 PM UTC

Banxico has cut the policy rate by 25bps to 11% from 11.25%. The board stressed the drop on core inflation although their balance of risks is biased to upside. Banxico has not given any forward-guidance stating the next decision will be data-dependent. We believe Banxico will continue to cut the pol

March 19, 2024

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Banxico Preview: Ready to Start Cutting
Paying Article

March 19, 2024 2:40 PM UTC

The Banxico board will meet on Mar. 21 to decide the policy rate after 12 months of unchanged rates at 11.25%. With inflation now at 4.4% and signs of economic deceleration, a cutting cycle is anticipated. Banxico's exclusion of forward guidance hints at potential cuts, despite possible dissent amon

March 18, 2024

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China: Unbalanced Growth
Paying Article

March 18, 2024 8:28 AM UTC

The February monthly data shows unbalanced growth.  Industrial production and public investment picked up, but retail sales slowed and residential property remains a negative drag on GDP.  While H1 GDP growth will be ok, it will likely slow in H2 and we still stick to a forecast of 4.4% for 2024 a

March 15, 2024

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China: No PBOC MTF Cut and Protesting Low Government Bond Yields
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March 15, 2024 8:51 AM UTC

Bottom Line: The PBOC decided not to cut the Medium-Term Facility (MTF) rate, but surprised by also withdrawing liquidity in what looks like a protest at the recent decline in government bond yields.  A 10bps MTF cut should still arrive in Q2, but later rather than sooner.