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.
Tags:
Related research
Post
Why an ageing population doesn’t mean soaring inflation
What’s the future for inflation? Joachim Nagel, the new president of Germany's central bank, believes the rapidly ageing global population will play a key role – ramping up pressure on prices in the medium term. While we agree slowing labour supply will stifle output growth, in his recent discussion Nagel failed to fully consider the demand side of the argument.
Find Out More
Post
Surging global food prices could drive eurozone core inflation higher
Along with energy prices, global food prices have emerged as a key driver of the eurozone's current inflationary surge. Like other advanced economies, eurozone countries tend to be less exposed to global food price fluctuations. But if persistent and combined with strong demand, high food prices could result in a higher pass-through to core inflation.
Find Out More