AMERICAS
Brazil reports February trade data Monday. Q4 GDP data will be reported Wednesday, with growth expected to pick up to 1.6% y/y from 1.2% in Q3. Next COPOM meeting is March 18 and rates are likely to be kept at 4.25%. With the real remaining under pressure, we do not think policymakers can risk cutting rates further, even though growth continues to disappoint.
Colombia reports February CPI Thursday and it is expected to rise 3.72% y/y vs. 3.62% in January. If so, inflation would move back towards the top of the 2-4% target range. Next central bank meeting is March 27 and rates are likely to be kept at 4.25%. As is the case for so many others, policymakers are more concerned about the growth risks looming ahead and are likely to keep rates steady for the time being.
Chile reports February CPI Friday and it is expected to rise 3.6% y/y vs. 3.5% in January. If so, inflation would be the highest since July 2016 and move further towards the top of the 2-4% target range. Next central bank meeting is March 31 and rates are likely to be kept at 1.75%. Lower copper prices are a growing headwind which may eventually tip the bank into cutting rates again despite high inflation.
EUROPE/MIDDLE EAST/AFRICA
Israel holds its third general election in less than a year Monday. 61 seats are needed to form a majority in the Knesset. The final polls released before the vote were inconclusive, suggesting that the nation could end up with its third hung parliament. The shekel has gotten swept up in the wave of weakness washing over EM, but policymakers are most likely embracing it. Next central bank meeting is April 6 and may take a more dovish stance if the global backdrop worsens.
Turkey reports February CPI Tuesday and it is expected to rise 12.70% y/y vs. 12.15% in January. If so, inflation would continue to rise further above the 3-7% target range. Next central bank meeting is March 19 and another small cut from the current 10.75% is possible even though growth rebounded to 6% y/y in Q4. For Erdogan, it’s growth at all costs and so policymakers will remain under pressure to deliver more stimulus.
South Africa reports Q4 GDP Tuesday. In y/y terms, the economy is expected to contract -0.2% vs. +0.1% in Q4. In SAAR terms, GDP is expected to contract -0.2% vs. -0.6% in Q3. Next SARB meeting is March 19 and rates are likely to be kept steady at 6.25% if the rand remains under pressure. The economy is clearly suffering, but policymakers cannot risk feeding more fuel to rand weakness.
National Bank of Poland meets Wednesday and is expected to keep rates steady at 1.5%. CPI rose 4.4% y/y in January, the highest since December 2011 and well above the 1.5-3.5% target range. However, policymakers are more concerned about the growth risks looming ahead and are likely to maintain loose policy for the time being.
Russia reports February CPI Friday and it is expected to rise 2.3% y/y vs. 2.4% in January. If so, inflation would continue to fall further below the 4% target. Next central bank meeting is March 20 and another 25 bp cut to 5.75% is likely. Lower oil prices are a growing headwind to growth and so easing is likely to continue in Q2 and perhaps beyond.
ASIA
Caixin reports February China manufacturing PMI Monday and it is expected to tumble to 46.0 from 51.1 in January. Caixin then reports services PMI Wednesday and it is expected to tumble to 49.3 from 51.8 in January. On Saturday, official PMI readings came in much weaker than expected, with manufacturing falling to 35.7 from 50.0 in January and non-manufacturing falling to 29.6 from 54.1 in January. China reports February trade and foreign reserves data over the weekend. Exports are expected to contract -23.5% y/y and imports by -14.7% y/y.
Korea reports February CPI Tuesday and it is expected to rise 1.3% y/y vs. 1.5% in January. If so, inflation would continue to fall further below the 2% target. Bank of Korea surprised markets last week by keeping rates steady at 1.25% rather than cutting 25 bp as most expected. Next central bank meeting is April 9 and a 25 bp cut to 1.0% is likely if the regional outlook remains weak.
Bank Negara meets Tuesday and the market is evenly split between a cut and no cut. CPI rose 1.6% y/y in January and is the highest since May 2018. However, the central bank does not have an explicit inflation target and so growing risks to growth may lead it to cut rates 25 bp this week. January trade data will be reported Wednesday, with both exports and imports expected to contract -1.3% y/y.
The Philippines reports February CPI Thursday and it is expected to rise 3.0% y/y vs. 2.9% in January. If so, inflation would be the highest since May 2019 but would still come in right at the 3% target. Next central bank meeting is March 19 and another 25 bp cut to 3.5% seems likely due to rising risks to growth.
Thailand reports February CPI Thursday and it is expected to rise 0.80% y/y vs. 1.05% in January. If so, inflation would fall below the 1-4% target range. Next Bank of Thailand meeting is March 25 and another 25 bp cut to 0.75% is possible as risks to growth mount. On top of the coronavirus risks, political tensions are rising as students protest the breakup of the leading pro-democracy party.
