Next week is packed with central bank decisions, both in developed and emerging markets. On the developed market side, the Reserve Bank of Australia will likely remain on hold, given the country's subdued inflationary pressure.
Inflation disappointed in New Zealand, and the Reserve Bank of New Zealand should consequently keep its policy rate at 1.75%. Finally, markets are also expecting the Bank of England to leave its policy rate unchanged at 0.50%.
Rate hikes can’t be completely ruled out for the rest of the year though, as inflation has reached levels around 3% (against 2% target). In emerging markets, the Brazilian and Russian central banks have room to cut policy rates further, given muted inflation in both countries. An expected cut in Brazil should be the last one in this cycle, while CIO thinks gradual rate cuts to 6.50% (from 7.75%) in Russia are likely by year-end, assuming contained inflationary pressure there and benign global conditions. Further policy rate decisions will take place in India, Poland, Mexico and the Philippines.
Apart from monetary policy, CIO is watching service PMI data releases, trade data from the US, Australia and China, and inflation data from Norway, Turkey and China.
By UBS
