This week sees a busy calendar in the CEE region, but the focus will still be on global headlines and developments in the US-Iran conflict.
Today, the Czech Republic will release March inflation, which we expect will fully reflect the increase in fuel prices. Our economists expect a spike from 1.4% to 2.1% YoY, just slightly above market expectations. However, last week the government introduced a combination of fixed margins for fuel prices and a partial reduction in excise duty, which will be visible in April. In Romania, the central bank is expected to leave rates unchanged at 6.50%. A rate change was not on the National Bank of Romania’s table even before the start of the US-Iran conflict, and recent developments will likely have pushed inflation well above 10% in our forecast; this will only prolong the wait for the first rate cut.
On Wednesday, inflation will be released in Hungary, where we expect an increase from 1.4% to 2.2% YoY in line with expectations. Retail prices and industrial production data will also be released. On Wednesday, the National Bank of Poland is expected to leave rates unchanged at 3.75%, and attention will be on Thursday’s press conference and the governor’s forward guidance.
On the political side, on Sunday, Hungary will hold a general election. Here, polls favour the opposition, but we expect a tight race. Hungarian assets are the only ones in CEE to have visibly reacted to the local story and have somehow deflected the global influence. We’ve seen the forint outperforming the rest of the region in recent days, which is likely to continue this week as well.
The rest of the region remains captive to the global story, where even some risk-on switching hasn’t really translated into EUR/CZK and EUR/PLN, which remain largely unchanged. The National Bank of Poland is likely to push against the need for rate hikes this week, with less than two priced in the next 12 months. This could be slightly negative for FX, which has stabilised slightly below 4.270.
Frantisek Taborsky