The MPC meeting in South Africa is the key event today

EMEA Daily

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Review

It was a rather calm day yesterday with only core inflation for September in Poland being released. Core inflation in September inched slightly up to 2.9% y/y from 2.8% y/y in August. There was no market reaction on the back of the numbers and it does not change our outlook on Polish inflation. We see average inflation at 3.5% y/y this year and 2.6% y/y in 2010E.

Preview

The MPC meeting in South Africa is the key event today. Our call for unchanged interest rates is also the consensus, but uncertainty of the outcome remains fairly high. In our view, inflation that is still above inflation target range (at 3-6%) should prevent the central bank from reducing interest rates further. But we also acknowledge that the latest hard data disappointed strongly. This combined with the current excessively strong rand could add to the arguments for cutting interest rates further. Nonetheless, we believe that the SARB would rather stick to a prudent monetary policy. Thus, we expect no further cuts.
Besides the MPC meeting in South Africa, Hungarian retail sales for August and Lithuanian industrial production for September should be worth noting.

Trading update

Most of EMEA-FX markets lost ground during Wednesday as the US dollar rebounded somewhat.
The South African rates could fall ahead of the MPC meeting today.

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Published On Thu, Oct 22 2009, 05:28 GMT

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Danske Bank A/S

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