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Bank of Israel steps up tightening

The Bank of Israel hiked its policy by a larger-than-expected 40bp today, to 0.75%, and the backdrop of a strong economy, tight labour market and mounting inflation pressures means that we think it will deliver further hikes at its upcoming meetings, to 2.25% by early next year.
Joseph Marlow Assistant Economist
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Emerging Europe Economics Update

Russian sovereign default more symbolic at this stage

Russia’s government has now reportedly defaulted on its foreign-currency denominated debt for the first time since 1918, but this is a largely symbolic event that is unlikely to have an additional macroeconomic impact. Sanctions have already done the damage and locked Russia out of global capital markets.

27 June 2022

Emerging Europe Economics Weekly

Governments collapse, Russia set to default

Governments in Israel and Bulgaria collapsed this week which may delay support to households over the cost of living. The threat to Bulgaria’s economy is probably greater, as political instability also puts EU fund inflows and the ability to secure gas supplies at risk. Elsewhere, a 30-day grace period for Russia’s government to make interest payments on Eurobonds ends on Sunday. While Russia has signalled that it is willing to make the payments in rubles, this would be a breach of the contract and could mark Russia’s first default on foreign currency debt since the Bolshevik revolution.

24 June 2022

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

More from Joseph Marlow

Emerging Europe Economics Weekly

Gas supplies at risk, CNB shake-up, Turkey FX restrictions

Russia’s sanctions on European energy companies and the closure of the Sokhranivka transit point in Ukraine this week are a sign that the risk of energy supply disruptions in Central and Eastern Europe is increasing. Meanwhile, changes to the board of the Czech central bank over the coming months, starting with this week’s appointment of Aleš Michl as the next governor, could pave the way for a more dovish MPC that cuts interest rates quickly once inflation drops back. Finally, reports of Turkey’s increased oversight over FX transactions could be the first step towards restrictions that threaten to disrupt activity. EM Drop-In (17th May): Do current EM debt strains point to a repeat of the kinds of crises seen in the 1980s and 1990s? Join our special briefing on EM sovereign debt risk on Tuesday. Register now.

13 May 2022

Emerging Europe Economics Update

CNB steps up tightening, but NBP opts for a smaller hike

Central banks in Czechia and Poland caught investors by surprise today as the Czech central bank (CNB) unexpectedly re-accelerated the pace of its tightening cycle with a 75bp hike while Poland’s central bank (NBP) slowed the pace of tightening with a smaller-than-expected hike (also of 75bp). With inflation still the main concern we expect interest rates to rise to at least 7.00% in both countries this year. China Drop-In (12th May, 09:00 BST/16:00 SGT): Join our China and Markets economists for a 20-minute discussion about near to long-term economic challenges, from zero-COVID disruptions to US-China decoupling. Register now.

5 May 2022

Emerging Europe Data Response

Czech GDP (Q1 2022)

The 0.7% q/q expansion of Czech GDP in Q1 was slightly stronger than expected, although it still marked a slowdown in growth and, in particular, there were signs of weakness at the end of the quarter. We think that spillovers from the war in Ukraine will weigh heavily on industry and cause the economy to contract in Q2.

29 April 2022
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