CIS-4: Domestic resilience leads to softer rates outlook
At a Glance
The desk interprets the outlook for the CIS-4, particularly Armenia and Azerbaijan, as increasingly favorable due to domestic resilience amidst a backdrop of global inflationary pressures. Per the full note source, the recent performance indicates potential for softer monetary policies as Kazakhstan and Uzbekistan show weak CPI trends. This, alongside Armenia's stable political landscape and beneficial trade conditions for Azerbaijan due to higher fuel prices, suggests a continuing accommodative environment which contrasts with broader inflationary pressures.
Key Takeaways
- 01Domestic resilience observed in CIS-4 economies supports a softer rates outlook.
- 02Kazakhstan and Uzbekistan's lower CPI provides room for dovish policy shifts.
- 03Armenian political stability post-elections fosters confidence in the dram.
- 04Azerbaijan benefits significantly from elevated fuel prices.
Full Analysis
What the desk is arguing
The resilience of domestic markets in the CIS-4 region is set against a generally inflationary global landscape, presenting the potential for softer interest rates. Per the full note source, the central banks in these regions may have room to maneuver, especially in Kazakhstan and Uzbekistan where CPI data is trending lower.
The commentary notes that Kazakhstan and Uzbekistan's softer CPI figures could create space for policy adjustments. With inflation rates moving within the 4-5% range in Armenia, alongside a supportive domestic environment, the Central Bank of Armenia is likely to maintain its policy rate unchanged at 6.50%, reinforcing our outlook.
Where it sits in our coverage
The consensus target for the Armenian dram against the US dollar sits at 1.075, with forecasts ranging between 1.04 and 1.12. Specific forecasts include: - jpmorgan targeting 1.10 by Mar26 - bofa suggesting a lower benchmark at 1.04 for the same date
Our viewpoint aligns closely with jpmorgan, placing us at the upper end of the range.
How other firms see it
Firms such as jpmorgan and goldmansachs share a relatively optimistic perspective on the Armenian dram, reflecting bullish attitudes towards its stability. Conversely, bofa holds a more bearish stance, advocating caution amidst the still-inflationary global backdrop.
Watch the interplay between USD/AMD, particularly how Armenia's political developments might shape the currency's trajectory. Relevant indicators such as inflation rates in the region will also be crucial for traders.
Market Implications
Traders should monitor the 1.075 level for USD/AMD as a key pivot point. A sustained breach above could signal pressure, while support remains bolstered by the Central Bank's stable policy stance. The upcoming performance of CPI data will also be instrumental in shaping currency direction.
From the original
Articles CIS-4: Domestic resilience leads to softer rates outlook 10:35 Armenia Azerbaijan Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download A firmer commodity price outlook adds to the global inflation story, but CIS-4 remains mainly driven by domestic
Related speeches
4 itemsWhat the US-Iran peace deal means for Asia
The desk interprets the recent US-Iran peace deal as a positive driver for Asian economies, particularly reducing inflationary pressures and providing central banks in the region, including Taiwan and India, with greater latitude to postpone interest rate hikes. Per the full note from ing-think, easing oil supply constraints and a potential 50% return to normal flows through the Strait of Hormuz by the end of June are pivotal in fostering enhanced consumer and business sentiment in importing nations. However, the desk acknowledges that while there is room for optimism, significant challenges remain regarding elevated oil prices and the lingering risk of food inflation.
Uzbekistan policy rate on hold, but cuts starting to look possible soon
Lead — The Central Bank of Uzbekistan has maintained its policy rate at 14.00%, but recent statements suggest a shift towards potential easing measures in the near future. Per the full note from ING, while the central bank remains cautious given current inflationary pressures, it now explicitly articulates conditions under which it could initiate rate cuts, anticipating a possible reduction in July or September. This nuanced pivot is particularly significant against a backdrop of stable core inflation and a commitment to maintaining economic stability. Market participants should take note of these developments, especially given the lack of upcoming high-impact events in the region.
Monitoring Turkey: Softening in economic activity
The desk suggests that Turkey's economic landscape is deteriorating, with domestic demand faltering significantly and negative net exports further constraining growth. Per the full note [source], the country's GDP growth is projected to slow to around 3% this year, exacerbated by high borrowing costs and tight monetary policies. Inflation remains troubling, staying close to 30%, which will likely necessitate sustained tight monetary policy. With no major events scheduled in the next month, current market dynamics indicate a focus on these economic signals and their potential impacts on the Turkish Lira.
CEE: Moving in all directions
Per the full note by ING strategists, CEE economies are diverging in policy paths but share a broadly benign outlook. Poland holds rates steady amid easing inflation and softening growth, while the Czech Republic expands with contained CPI despite cost pressures. Hungary's post-election rally supports an easing bias with scope for summer rate cuts as risk premia fall. No high-impact events are on the calendar in the next 30 days for these jurisdictions.
More from ING THINK
5 items- ING THINK
Aluminium deficit persists despite easing Middle East tensions
- ING THINK
Polish activity data slows further in 2Q but 3.4% growth still achievable for 2026
- ING THINK
FX Daily: Lack of GBP political premium cuts both ways
- ING THINK
ING lifts South Korea 2026 GDP growth forecast to 4% from 3%
- ING THINK
Germany’s reform train is picking up steam