By Natalia Gurushina, Chief Economist, Emerging Markets Bond Strategy, VanEck
The poor publication of Polish inflation indicates that it is too early for the central bank to relax. Brazil may have been one of the budget stars of emerging markets this year – can the government resist the temptation to spend more?
Some central banks have claimed for too long that inflation is a paper tiger. Well the tiger is real and it bites. today impression of inflation in Poland was nasty – annual headline inflation jumped to 6.8%, and the rise in core inflation (estimated at 4.6%) signals that not all price pressures are temporary. The Polish central bank (NBP) surprised with a 40 basis point rate hike earlier this month, but indicated in subsequent communications that there would be no prolonged campaign of “shock and fear”. “. This morning outing suggests that this assessment could have been premature, and that the NBP may need to deliver a double punch at its next meeting (in the form of a hike of around 50 basis points) to regain credibility – especially in the context of the government’s budget push.
When it comes to budget plans, few countries attract as much attention as Brazil. today public administration budget figures looked really good – the 12-month current primary deficit fell to 0.63% of GDP and the overall deficit to 4.84% of GDP in September due to stronger growth and higher inflation. But maybe it is a “short term gain / long term pain” situation, if the government tries to buy votes with higher social spending in the run-up to elections, which increases inflationary pressures. The the central bank will be forced to tighten further, and local bonds will continue to suffer – if this scenario were to materialize.
Political discourse often keeps us on edge these days – especially when it comes to taxes and the environment. We have decided to end this week with some fun facts (and pictures) about the two. In France, wineries are allowed to pay certain taxes in kind – more specifically, in marc, which is the residue left after the grapes have been crushed and pressed to extract the juice (see photo below). It’s good for the government – then they can get other things out of it and pocket the money. It’s good for the environment – production without waste. And a taxman can take a break from the routine of the office! Stay tuned and have a great weekend!
Graphic at a glance: a fun (and eco-friendly) way to pay taxes
Source: Natalia Gurushina
Originally posted by VanEck on Oct 29, 2021.
For more news, information and strategy, visit the Beta Beyond Basic channel.
PMI Index – Purchasing Managers: economic indicators derived from monthly surveys of private sector companies. A reading above 50 indicates expansion and a reading below 50 indicates contraction; ISM – PMI Supply Management Institute: ISM publishes an index based on more than 400 surveys of purchasing and supply managers; both in manufacturing and non-manufacturing industries; CPI Consumer Price Index: an index of the change in prices paid by typical consumers for retail goods and other items; PPI – Producer price index: a family of indices that measures the average change in selling prices received by domestic producers of goods and services over time; PCE inflation – Price index of personal consumption expenditure: a measure of US inflation, which tracks changes in the prices of goods and services purchased by consumers throughout the economy; MSCI – Morgan Stanley Capital International: a US provider of equity analysis tools, fixed income securities, hedge fund market indices and equity portfolio analysis tools; VIX – CBOE Volatility Index: an index created by the Chicago Board Options Exchange (CBOE), which shows market expectations for 30-day volatility. It is constructed using the volatilities implied on the options of the S&P 500 Index .; GBI-EM – JP Morgan’s Government Bond Index – Emerging markets: comprehensive emerging market debt benchmarks that track local currency bonds issued by governments in emerging markets; EMBI – JP Morgan Emerging Markets Bond Index: JP Morgan index of sovereign bonds denominated in dollars issued by a selection of emerging countries; EMBIG – JP Morgan Global Emerging Markets Bond Index: tracks the total returns of external debt instruments traded in emerging markets.
The information presented does not imply the provision of personalized investment, financial, legal or tax advice. This is not an offer to buy or sell, nor a solicitation of an offer to buy or sell the securities mentioned herein. Certain statements contained in this document may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results. Certain information may be provided by third party sources and, although believed to be reliable, it has not been independently verified and its accuracy or completeness cannot be guaranteed. All opinions, projections, forecasts and forward-looking statements presented herein are valid as of the date of this communication and are subject to change. The information contained in this document represents the opinion of the author (s), but not necessarily those of VanEck.
Investing in international markets involves risks such as currency fluctuation, regulatory risks, economic and political instability. Emerging markets involve increased risks related to the same factors as well as increased volatility, lower trading volume and lower liquidity. Emerging markets may have greater custody and operating risks and less developed legal and accounting systems than developed markets.
Any investment is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that the investment objectives will be achieved and investors may lose money. Diversification does not guarantee a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.
Learn more at ETFtrends.com.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.