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Estonian inflation is expected decline further in October

Fri, Nov 6 2009, 06:15 GMT
by Lars Christensen

Danske Bank A/S

Review

• The Czech central bank (CNB) has decided to keep interest rates on hold keeping the key policy rate at 1.25%. This was in line with the consensus expectation, but contrary to our expectation of a 25 basis point cut. Even though the CNB kept rates unchanged yesterday it should be noted that three board members voted for a rate cut, while four voted for keeping rates unchanged. Furthermore, it should be noted that “non-rate easing tools” was debated – indicating that some CNB board members see deflationary risks. Overall, we believe the door is still open for rate cuts in the Czech Republic – especially if CZK remains stable. 

• Yesterday, the Latvian parliament, Saeima, voted in favour of the first reading of the 2010 budget after a lengthy debate. This undoubtedly is good news as it reduces political uncertainty, but that said the vote yesterday does not automatically guarantee that the parliament would also vote for the budget in second reading, due in early December, as tension within the governing coalition remains taut. Furthermore, it is uncertain whether the IMF and EU believe this budget fulfils what has been agreed in Latvia’s Standby Agreement. 

• Yesterday, flash estimate of Hungarian industrial production in September showed that industrial output fell by an annual 15% – less than expected and less compared with August’s 19.8% y/y fall. Going forward, industrial production should improve further, although very moderately.

  
  

Preview

• Estonian inflation is expected decline further in October. Besides Estonian inflation for October, trade balance for September is due for release in Hungary and the Czech Republic.

Trading update

• It was a eventful day for the EMEA markets yesterday with much regional and global news and the markets are clearly still jittery. Today the focus of attention is expected to again turn to global news flow, when the US labour report is issued. Our US analysts see a better than consensus reading on the US labour report. If that is so it could provide some relief to the EMEA markets ahead of the weekend. That said strong ISM numbers and US GDP Q3 numbers have failed to calm nerves in the EMEA markets.

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Published on  Fri, Nov 6 2009, 06:18 GMT