Inflation Surprises in Central and Eastern Europe (CEE)
Yesterday’s inflation figures in the region brought surprises in both directions. In Hungary, inflation surprised slightly down with a drop from 3.1% to 3.0% YoY. On the other hand, in the Czech Republic, it surprised on the upside with a rise from 2.2% to 2.6% YoY. Let’s dive deeper into the implications of these surprises and what they mean for investors and the broader economic landscape.
Implications for Central Banks in CEE
- Central banks in CEE are now in hawkish mode.
- In Hungary, the slight decrease in inflation will not prompt a rate cut in October.
- In the Czech Republic, the higher-than-expected inflation increases the probability of a pause in the cutting cycle.
CEE FX Market Analysis
This morning, Romania also released its inflation numbers for September. Inflation fell from 5.10% to 4.62%, slightly below the 4.70% consensus. This data adds another layer of complexity to the evolving economic landscape in CEE.
Market Volatility and Currency Trends
- Despite signs of stabilization earlier in the week, yesterday’s events underscore the ongoing fragility of CEE FX markets.
- The Czech Republic’s higher inflation numbers may lead to hawkish comments from the central bank, potentially supporting the koruna in uncertain times.
- The National Bank of Hungary has ruled out a rate cut in October, but the forint remains sensitive to global exposure.
Future Outlook
While the koruna and zloty appear more defensive, the forint’s performance will continue to be influenced by global factors. Investors should monitor these developments closely to navigate the evolving CEE market dynamics.