Monthly cis 4 whos afraid of higher core rates

Key arguments

• Base case: selective dovishness and FX-constructive outlook, with policy responses remaining country-specific.
• Kazakhstan and Uzbekistan retain room for cautious easing, limited to 1.0-1.5ppt of cuts through end-2027.
• Adverse scenario: higher core yields would weaken carry support for tenge and soum, exposing them to imported inflation.
• Domestic buffers - Kazakh FX sales backlog, Uzbek gold exports, Armenian remittances, Azerbaijani sovereign assets - argue against an indiscriminate sell-off.

Corresponding source evidence

1. But resilience to more persistent global inflation and higher core rates could be put to the test through the exchange rate channel.
2. While we don't expect a sell-off, high real rates will be required to keep attracting portfolio inflows Higher oil prices are strengthening Azerbaijan's economic buffers Base is bliss: selectively dovish and FX-constructive Since the outbreak of Middle East tensions, the CIS-4 has weathered higher volatility, rising global inflation expectations and tighter core rates, easing some of our initial concerns.
3. Higher energy and freight costs lift imported inflation, but CIS-4 currencies, so far resilient to tighter global rates, should keep policy responses country- specific.