Research Briefing | Dec 16, 2021

Inflation risks pose conundrum for the CEE

Europe | Inflation risks pose conundrum for the CEE

Inflationary pressures have strengthened and broadened in Central and Eastern Europe recently, prompting a hawkish turn by the region’s central banks. We still think many of the drivers are temporary and will gradually abate next year. But risks of persistently high inflation driven by structural factors are now emerging, leading us to raise our inflation forecasts again.

What you will learn:

  • The CEE region has been hit hard by the current wave of infections, prompting policymakers to re-impose containment measures.
  • Inflation will continue to rise during the winter, before slowing in H2 2022 as many of the current drivers will gradually fade.
  • But risks are high that inflation might trend higher yet. This leaves CEE central banks in a bit of a conundrum. Most have turned hawkish in recent months, front-loading hikes as inflation soared.
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