Research Briefing | Jul 27, 2021

Europe | Inflation threats pose dilemmas for CEE policymakers

Ipad Frame -Europe-Inflation-threats-pose-dilemmas-for-CEE-policymakers

Elevated inflation is giving policymakers in Central and Eastern Europe headaches. Two of the regions’ outperformers, Poland and Hungary, are seeing headline inflation at around 5%. While we think many of the inflation drivers are transitory, some pose genuine risks.
What you will learn:

  • Central banks in the region remain credible and inflation expectations are anchored so far, but the Polish (NBP) and Hungarian (MNB) central banks will need to calibrate policy carefully. We’re expecting more front-loaded recoveries in Poland and Hungary, which will add to inflationary pressures.
  • The growth outperformance of CEE countries versus the eurozone will bolster the Czech Republic and Poland’s fundamentals-driven currency appreciation, thus dampening inflation.
  • Hungary’s FX position remains precarious, with the MNB having to manage both long and short rates.
Back to Resource Hub

Related Services

Post

GCC: Key themes shaping city economies in the near term

For Gulf cities, the near-term outlook will be tied not only to the global macroeconomic backdrop, but also the progress of the diverse visions and strategies in the region. With the aim to diversify their economies and reduce the dependence on oil, Gulf states continue to invest in the non-oil economy and implement various reforms. That said, oil revenues remain key to funding diversification efforts.

Find Out More

Post

Indonesia rate cuts will bolster credit demand, with pockets of risks

We forecast Bank Indonesia will start cutting its policy rate in Q2, which will provide a cyclical tailwind for credit growth and consequently domestic demand, as lower real lending rates will help boost loan demand.

Find Out More