The deepening crisis in the euro-zone has led to a marked deterioration in the outlook for growth across Emerging Europe, but it will bring a range of different responses from policymakers in the region. At one extreme, in Hungary perennial concerns about the health of the banking system, combined with several failed debt auctions and the increasing likelihood of a sovereign downgrade, mean that defensive interest rate hikes are on the cards. In the absence of a marked turnaround in investor risk appetite an emergency hike of perhaps 100-200bps now seems likely over the next couple of months. At the other end of the scale, there is scope for some policy easing in Poland and the Czech Republic – we have pencilled in rate cuts in Poland from Q1 next year, while Czech policymakers could cut rates as soon as next month.