Inflation fears but Turkey is probably still in rate cut mode

A money changer holds Turkish lira banknotes at an exchange office in Ankara, Turkey on October 12, 2021. REUTERS / Cagla Gurdogan / File Photo

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Nov. 18 (Reuters) – A look at the day ahead from Sujata Rao.

These inflationary fears simply will not go away.

European gas prices have resumed their ascent and are up 60% so far in November, while data on Wednesday showed a U.S. housing construction industry in the throes of labor shortages and of material. And companies continue to warn of higher costs that could affect margins.

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All this on top of last week’s anti-forecast inflation data from the United States, Britain and Canada, among others.

Uncertainty over the impact this could have on economic growth and expectations of earlier-than-expected interest rate hikes are limiting equity gains, keeping global stocks and the S&P 500 flat for the week. It also keeps demand for government bonds going, after Treasury yields fell on Wednesday.

Worried governments are pondering relief – China has said it will release oil from reserves, following a US proposal for a coordinated release of stocks by major oil-consuming nations Read more.

The news caused oil prices to drop by $ 1.

Emerging markets have had a scorching spell this year, with most being forced to raise interest rates to control inflation and preserve their yield premiums relative to developed markets. Average government borrowing costs have climbed 160 basis points this year, according to a JPMorgan index (.JGEGDCM)

On Thursday, South Africa could join the rate hike brigade; despite moderate inflation, it may find interest in striking early.

But there are exceptions. Economists expect Turkey to cut rates by 100 basis points to 15%, about five percentage points below inflation. The lira has lost about 30% against the dollar this year – now at 11 to the dollar, it was 6.9 in March.

Will central bank governor Sahap Kavcioglu follow President Tayyip Erdogan’s line and cut rates? Standing up to protect the pound from further losses may well see him become the fourth governor to lose his job in the past two years and more.

Timeline of the read

Key developments that should provide more direction to the markets on Thursday:

-Japan’s new stimulus package will include record spending of around $ 488 billion read more

-Carlyle says buyout talks with Metro Bank have ended read more

-The profit of Thyssenkrupp will double in 2022, announces the IPO of hydrogen read more

-German car registrations

-Fed Speakers: Chicago President Charles Evans

-Emerging markets: central banks meet in South Africa, Turkey, Indonesia, Philippines

-Results Europe: Royal Mail, National Grid, ThyssenKrup

-American results: Macy’s Alibaba, Kohl’s

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Reporting by Sujata Rao; edited by Karin Strohecker

Our Standards: Thomson Reuters Trust Principles.

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