"All eyes on the Fed: The prospects of the beginning of Fed tapering will most likely be the centre of attention for markets next week. The gradual removal of monetary stimulus and tighter external funding conditions will pose a threat to those CEEMEA countries which have thus far benefitted from easy access to funding. This week’s current account releases in South Africa and Turkey acted as a reminder of how serious these challenges still are. Meanwhile, on the policy front, central banks like the CBT in Turkey have maintained their unorthodox stance, and others like the NBH in Hungary are also getting more creative, with this week’s announcement of a big increase (6.5% of GDP) in its FGS initiative to push loans into the SME sector. In a similar creative vein, in Russia, where bank demand for CBR financing is growing and conventional collateral is limited, the CBR announced the next auction on October 14, at which it will provide financing of up to RUB 500 billion (US$15 billion) against bank loans.
Next week, we have three monetary policy meetings in Turkey, South Africa and Ghana. We do not expect any policy rate changes.The timing of the CBT meeting in Turkey (one day ahead of the Fed) likely means that the bank will hold steady and, if anything, it may choose to implement a change in the RRR rates or the ROC on FX deposits after it has seen the outcome of the Fed meeting.This can happen at any time by board approval and independent of the MPC. In South Africa, we believe that the current weak growth environment will make it difficult for the SARB to begin a policy normalisation exercise any time soon.
In terms of upcoming data, we expect the South Africa August CPI print to come in at 6.4%Y on September 18, and July retail trade to be published on the same day to accelerate from 1.9%Y to 5.5%Y. In Poland, we expect the August IP (Wednesday) and labour market data (Tuesday) to be distorted by working days (especially output). While the headline prints could surprise on the downside, we would encourage investors to focus on the workday-adjusted series, which in our opinion is likely to continue to improve. On the policy front, we are likely to hear more about some Polish pension reform details (no set date). And in Hungary, we may get some interesting headlines around the beginning of next week on the subject of FX mortgage relief, following the Banking Association’s meeting on Monday. In Russia, we expect this week’s data release to show signs of the 2H pick-up, including a rise in IP to 0.3%Y growth, helped by the better harvest."
