AMERICAS
Mexico reports February CPI Monday, with headline expected to rise 3.58% y/y vs. 3.24% in January. If so, inflation would be the highest since July 2019 and nearing the top of the 2-4% target band. Next Banco de Mexico meeting is March 26 and another 25 bp cut to 6.75% is likely. However, the bank will struggle with the inflationary impact of the weak peso as well as the deflationary impact of plunging oil prices. January IP will be reported Friday, which is expected to contract -1.5% y/y vs. -1.05 in December.
Brazil reports January IP Tuesday, which is expected to contract -1.0% y/y vs. -1.2% in December. February IPCA inflation will be reported Wednesday, which is expected to rise 3.90% y/y vs. 4.19% in January. After the Fed cut, Brazil’s central bank issued a statement that that it’s closely monitoring the effects of the coronavirus on financial markets and on the economy, calling it a threat. CDI market went from pricing in no cut at the next COPOM meeting March 18 to pricing in 25-50 bp of easing.
Peru central bank meets Thursday and is expected to keep rates steady at 2.25%. However, a handful of analysts look for a 25 bp cut to 2.0%. CPI rose 1.90% y/y in February and remains in the bottom half of the 1-3% target range. There are risks of a dovish surprise but if Peru remains on hold this week, then it is likely to join the easing parade at the next meeting April 16.
EUROPE/MIDDLE EAST/AFRICA
Czech Republic reports February CPI Tuesday, which is expected to rise 3.7% y/y vs. 3.6% in January. If so, inflation would be the highest since March 2012 and further above the 1-3% target range. The central bank just hiked rates 25 bp to 2.25% in February. Next policy meeting is March 26 and steady rates are likely given rising risks to growth. January construction and industrial output (-1.3% y/y expected) will be reported Thursday, followed by retail sales Friday (3.5% y/y expected).
Hungary reports February CPI Tuesday, which is expected to rise 4.3% y/y vs. 4.7% in January. If so, inflation would decelerate for the first time since September but would remain above the 2-4% target range. January trade will also be reported Tuesday. Central bank minutes will be released Wednesday. Next policy meeting is March 24 and the bank may have to lean more dovish if growth risks continue to pick up.
South Africa reports January manufacturing production Thursday, which is expected to contract -4.5% y/y vs. -5.9% in December. Moody’s just cut its 2020 growth forecast for South Africa to 0.4% from 0.7% previously. The economy remains weak and yet it would be risky for the SARB to cut rates when the rand remains under tremendous pressure. Next policy meeting is March 19 and much will depend on the external environment.
Poland reports February CPI Friday, which is expected to remain steady at 4.4% y/y. If so, inflation would remain well above the 1.5-3.5% target. The central bank just left rates steady at 1.5% last week. However, it cut its growth forecasts whilst raising its inflation forecasts. If push comes to shove, we suspect the bank will err on the side of dovishness this year. Next policy meeting is April 8.
ASIA
China reports February money and loan data this week, but no date has been set. It reports February CPI and PPI data Tuesday. The former is expected to rise 5.2% y/y and the latter is expected to fall -0.3% y/y. Inflation is simply not a concern for policymakers. Rather, we look for more stimulus measures in the coming weeks to help the economy recover from the virus.
Taiwan reports February trade Monday. Exports are expected to rise 2.9% y/y and imports by 5.7% y/y. However, the data will be distorted by the Lunar New Year. Underlying trends suggest further weakness in regional trade, especially for those countries that are part of the greater China supply chain. The central bank next meets March 19 and we cannot rule out a rate cut.
India reports February CPI and January IP Thursday. Inflation is expected to ease to 6.79% y/y from 7.59% in January, while IP is expected to rise 0.3% y/y vs. -0.3% in December. If so, inflation would move back towards the 2-6% target range. Next RBI meeting is April 3 and it will be a tough call. Falling inflation and the sluggish economy call for a rate cut, but the weak rupee may prevent easing for now.
