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

UK: Sterling’s woes, Kwarteng’s vows, Bailey in the middle

The negative market reaction to last week's fiscal announcements appears to be a function of doubts over the credibility of the UK government's long-term fiscal plans. Though we think the structural position is not as bad as last Friday's drop in asset prices implies, it's clear the government will struggle to retain credibility if it fails to engage with market concerns.

Find Out More
Tokyo, Japan

Post

BoJ to look through a temporary decline in monetary base

The Bank of Japan (BoJ) left monetary policy unchanged at today's (22nd Sep) meeting, maintaining current short- and long-term interest rates, despite another wave of yen weakening and upward pressures on JGB yields. 

Find Out More