CIS-4: Who’s afraid of higher core rates?
At a Glance
The desk views the outlook for the CIS-4 region's currencies as resilient despite global challenges, primarily driven by domestic factors. As noted in the research from **ing**, the current situation reflects manageable risks stemming from persistent inflation and tightening core rates. Despite elevated global inflation expectations, CIS-4 economies appear to have weathered recent volatility, with Kazakhstan and Uzbekistan poised to cautiously adjust monetary policies as relevant inflation trends evolve. This assessment aligns with our consensus target range of 1.04 to 1.12 for regional currencies, compounded by factors such as oil prices and domestic demand.
Key Takeaways
- 01CIS-4 currencies remain resilient amid global inflation and tighter core rates.
- 02Kazakhstan and Uzbekistan have room for cautious monetary easing due to declining inflation.
- 03Higher oil prices strengthen Azerbaijan's economic buffers.
- 04Domestic demand pressures mitigate drastic rate adjustments.
Full Analysis
What the desk is arguing
The desk posits that the CIS-4 currencies can remain stable even amid looming global inflation pressures and increasing core rates. Per the full note from ing, the regional economic resilience underpins this projection, especially amid selective dovish sentiments from monetary authorities in the region.
Supporting this view, Kazakhstan’s inflation rate has dropped to 9.3% year-on-year, allowing a policy rate decrease from 18.00% to 16.25%. Uzbekistan shows promising inflation moderation down to 6.4%, creating room for a cautious easing of monetary policy that could enhance currency strength.
Simultaneously, an alternative scenario could involve significantly rising global risk aversion, prompting a sharp pullback in capital inflows to the region, which the desk does not foresee at this stage.
Where it sits in our coverage
Our consensus target for the CIS-4 currencies is set at 1.075, with a range between 1.04 and 1.12. Notable firm targets in this space include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This desk's favorable view aligns closely with jpmorgan's targets, indicating confidence in the region's currency stability amid global challenges.
How other firms see it
Firms such as jpmorgan and others are largely aligned with this constructive perspective on the CIS-4 currencies, supporting a domestic-driven growth narrative. In contrast, bofa provides a more cautious stance, reflecting concerns over potential external pressures.
Monitoring currency pairs like USD/KZT and other relevant economic indicators could be crucial, especially as domestic inflation reports release and geopolitical tensions evolve.
What the calendar says
No significant events are on the immediate horizon for the CIS-4 region that could impact market sentiment or economic conditions.
Market Implications
Investors should watch for a significant shift in inflation data from the region, particularly from Kazakhstan and Uzbekistan. Surprises in domestic inflation metrics could trigger adjustments in monetary policy and impact currency valuations accordingly.
From the original
Articles CIS-4: Who’s afraid of higher core rates? Published 09:47 Armenia Azerbaijan Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Our base case for the regional rates and currencies remains constructive and domestically-driven. But resilience to m
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