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Emerging Europe

Emerging Europe Economics Update

Emerging Europe Economics Update

CBRT: knock knock, anybody there?

High inflation, falls in the lira and aggressive monetary tightening elsewhere are clearly not enough to persuade Turkey’s central bank to lift interest rates, as it left its policy rate at 14.00% today. Disorderly falls in the lira are a major risk, which would probably be met with capital controls rather than rate hikes.

23 June 2022

Emerging Europe Economics Update

CEE inflation broadening out

Central and Eastern European economies are experiencing their worst bout of inflation since the late-1990s as surging food and energy prices have added to strong core price pressures across a broad range of goods and services. Monetary tightening cycles are likely to continue with interest rates rising to 8% or so over the next few months and we think that rates will remain above neutral for several years. World with Higher Rates - Drop-In (21st June, 10:00 ET/15:00 BST): Does monetary policy tightening automatically mean recession? Are EMs vulnerable? How will financial market returns be affected? Join our special 20-minute briefing to find out what higher rates mean for macro and markets. Register now  

20 June 2022

Emerging Europe Economics Update

Key questions on capital controls in Turkey

The recent falls in the Turkish lira have led to increased speculation that, with the CBRT showing no sign of willingness to raise interest rates, policymakers will be forced to turn to capital controls to prevent sharp and disorderly moves in the currency and contain risks in the financial system. In this Update, we answer a number of key questions on capital controls, including what form they could take, when they might be imposed and how effective they would be. World with Higher Rates - Drop-In (21st June, 10:00 ET/15:00 BST): Does monetary policy tightening automatically mean recession? Are EMs vulnerable? How will financial market returns be affected? Join our special 20-minute briefing to find out what higher rates mean for macro and markets. Register now

16 June 2022
More Publications

Emerging Europe Economics Update

Israel’s tight labour market to push up wages soon

Israel’s labour market has tightened significantly in recent months and while there is so far little sign of a burst of wage pressure coming through, this is likely to be in the pipeline and feed through into stronger core inflation next year. Alongside a more hawkish shift by the US Fed, we think the Bank of Israel will raise interest rates by 50bp in July and August and push rates from 0.75% now to 3.00% by early 2023.

Emerging Europe Economics Update

CBR lowers interest rates back to pre-war levels

The Russian central bank (CBR) delivered a 150bp interest rate cut to 9.50% today as its focus continued to shift away from inflation risks towards supporting the economy. We think further reductions are likely to be more gradual, with rates ending this year at 7.50%.

Emerging Europe Economics Update

Turkey, the lira and previous currency crises

The Turkish lira has continued to slide and the current backdrop is eerily similar to that which preceded previous currency crises. Sharp and disorderly falls in the lira over the coming weeks are now a real risk.

Emerging Europe Economics Update

Inflation at 70%, lira tumbling – but still CBRT holds

Despite the backdrop of inflation at 70% and the lira falling by falling by 10% against the dollar this month, Turkey’s central bank left interest rates on hold at 14.00% today. So long as President Erdogan is in power, rate hikes will remain off the cards and it’s more likely that policymakers turn to capital controls and more strident lira-isation efforts in the event of further pressure on the lira.

Emerging Europe Economics Update

Global slowdown and war spillovers to hit CEE exports

Exports from Central and Eastern Europe (CEE) face growing headwinds, and this feeds into our below consensus view on economic growth in the region. The larger economies in CEE such as Poland and Hungary are particularly exposed to slower growth in the euro-zone, while the Baltic states are more vulnerable to the direct spillovers from the war in Ukraine.

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