Inflation data have surprised on the upside in both Poland and Hungary in recent months, due in large part to recent currency weakness. But the bigger picture is that the pick-up in inflation in both countries has actually been fairly mild given the currency falls of the past six months. And with huge amounts of spare capacity set to open up we are sticking to our view that the region is more likely to experience a prolonged period of belowtarget, rather than above-target inflation. So while the pace of easing may slow, we maintain our below-consensus forecast for interest rates.