EMEA Weekly:EMEA Market Action The Ottoman Military Band March Style

Global uncertainty remains high, but the Russian economy has continued on a steady
growth path. In addition to this, credit growth continues to accelerate despite global jitters
and loans to households and firms are already increasing more than 30% and 23% y/y in
nominal terms, respectively. Unsurprisingly, the central bank is getting a bit worried of
this declining savings rate. Thus, we are not expecting lower rates from Russia despite
easing inflation and increasing expectations on rate cuts in the rest of Europe.

TCMB still active, while policy rates remain put

Since cutting the policy rates at the interim rate setting meeting in August by 50 basis
points to 5.75%, to shore up against slowing growth and as a pre-emptive measure against deteriorating external conditions, the Turkish central bank (TCMB) has taken an almost 180 degree turn and set out a rather hawkish stance in the face of lira depreciation that it views as excessive and accelerating inflation. Following the last inflation report, TCMB launched a lira supportive new policy approach that utilised a rate corridor on the o/n lending rates. For more on this, see “Special: TCMB’s colourful monetary mix” in EMEA.
Weekly: Week 45, 3 November. In terms of the actual policy rates, however, we no longer see any changes in either direction for the near term, as attention remains on the o/n rates and hence expect unchanged rates next week when the TCMB announces its policy rates.

South African inflation to remain elevated

The South African Reserve Bank (SARB) is in a challenging situation. On the one hand,
growth remains weak, but on the other inflation remains close to the upper end of the
SARB’s 3-6% inflation target range. SARB governor Gil Marcus has gone so far as to
talk about the risk of stagflation. However, next week’s South African inflation numbers
will give us and Gil Marcus more information about whether the stagflation fears are
overblown or not. We expect South African inflation to 6.0% y/y in October from 5.7%
y/y in September.