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2018/10/18 / Erste Group Research

Central banks currently on hold everywhere but Czech Republic

The Czech National Bank is going to tighten the monetary conditions further
regardless of what the ECB decides and the scale will depend not only on the
inflation development, but also on the exchange rate.

The policy rate in Hungary and
Poland has been locked at historically low levels already for a couple of years
and both central banks maintain a dovish stance as far as the interest rate level
is concerned. While in Poland the underlying demand pressure remains weak,
we see risks for Hungary from rising inflationary pressure stemming from the
tight labor market. The Hungarian forint fell the most YTD, money supply growth
(M2) is the most dynamic in Hungary (16.8% y/y as of August) and the curve is
the steepest in the region.

In Romania demand-side inflationary pressures have been easing
recently and headline CPI is expected to drop. Thus, the Romanian central
bank has less reason to hike the policy rate in the remainder of the year. The
trajectory of the policy rate in 2019 will mainly depend on incoming data, the
future stance of the ECB's monetary policy and the decisions of other central
banks in CEE.

Finally, the inflation outlook is not calling for a hawkish approach in Croatia or

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General information

AuthorErste Group Research
Product nameCEE Economies Special Report
Topic in focusFX, Macro/ Fixed income
Economy in focusCroatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia, Slovenia
Currency in focusCroatian Kuna, Czech Koruna, Euro, Hungarian Forint, Polish Zloty, Romanian Leu, Serbian dinar
Sector in focus-


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