Core inflation hits multi-year highs across CEE

Headline inflation has eased across Central and Eastern Europe (CEE) over the past few months, but that was entirely due to falling food and fuel inflation; core price pressures have continued to build. Indeed, core inflation hit multi-year highs in Poland, Hungary and Romania in October. Policymakers in these countries show no signs of responding to this and policy is likely to remain loose over the next twelve months or so. The one CEE country where core inflation has eased a touch is the Czech Republic. The Czech central bank is talking about interest rate hikes, but we expect falling inflation and weaker growth to prompt a shift towards easing around the middle of next year.