The jump in inflation across much of Emerging Europe last month has shifted the focus onto policy tightening. But in most cases this has been a one-off rise from higher fuel inflation, and there is little evidence that a policy response is imminent. While some MPC members in Poland have said that interest rate hikes may be considered later this year, they are in a minority. And Hungary’s MPC appears to be entirely unperturbed by higher inflation. Meanwhile, inflation in Russia has continued to fall and we hold a non-consensus view that the central bank will cut its policy rate by 50bp, to 9.50%, this month. If it doesn’t, policymakers should at least pave the way for the easing cycle to resume shortly. The outlier to all this is Turkey, whose central bank has already hiked interest rates this month. However, inflation there is on an altogether different scale to the rest of the region.
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