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23 Nov 2015
EM: Turkey and Brazilian central banks to steal the limelight – TDS
FXStreet (Delhi) – Research Team at TDS, suggests that this week there are two major EM rate decisions: Turkey on Tuesday and Brazil on Wednesday which are likely to steal the limelight.
Key Quotes
“In line with the almost unanimous consensus we expect the CBRT to keep all rates on hold, in particular the benchmark repurchase rate will remain at 7.5%. Core inflation was running at 8.9% Y/Y in October, way above the 5% target. However, the CBRT will hope that recent TRY strength and weak oil prices will help bring inflation down in the months ahead. Given the political pressures for lower rates, remaining on hold is the easiest option for the CBRT.”
“In line with the unanimous consensus we expect the Selic rate to be kept on hold at 14.25%. The press statement accompanying the October COPOM meeting repeated the formula “that the maintenance of this basic interest rate level, for a sufficiently long period, is necessary for the convergence of the inflation to the target in the relevant horizon for the monetary policy”. Inflation is continuing to creep up, with November IPCA-15 reaching 10.28% Y/Y. The DI curve pricing in little chance of a hike at Wednesday’s meeting, but is continuing to price in large rate hikes further out. Our central expectation is that 14.25% will represent the high point in the tightening cycle and that rates will start being cut towards the end of next year. However, in the coming months the risk to rates is clearly to the upside.”
Key Quotes
“In line with the almost unanimous consensus we expect the CBRT to keep all rates on hold, in particular the benchmark repurchase rate will remain at 7.5%. Core inflation was running at 8.9% Y/Y in October, way above the 5% target. However, the CBRT will hope that recent TRY strength and weak oil prices will help bring inflation down in the months ahead. Given the political pressures for lower rates, remaining on hold is the easiest option for the CBRT.”
“In line with the unanimous consensus we expect the Selic rate to be kept on hold at 14.25%. The press statement accompanying the October COPOM meeting repeated the formula “that the maintenance of this basic interest rate level, for a sufficiently long period, is necessary for the convergence of the inflation to the target in the relevant horizon for the monetary policy”. Inflation is continuing to creep up, with November IPCA-15 reaching 10.28% Y/Y. The DI curve pricing in little chance of a hike at Wednesday’s meeting, but is continuing to price in large rate hikes further out. Our central expectation is that 14.25% will represent the high point in the tightening cycle and that rates will start being cut towards the end of next year. However, in the coming months the risk to rates is clearly to the upside.”