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CNB makes a hawkish U-turn

The Czech National Bank (CNB) left its two-week repo rate on hold at 0.25% today and backtracked on its recent dovish guidance about the timing of policy tightening. We expect a first 25bp interest rate hike in November, but the risks are becoming increasingly skewed towards earlier policy normalisation.
Nicholas Farr Assistant Economist
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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

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

More from Nicholas Farr

Emerging Europe Data Response

Manufacturing PMIs (June)

The PMIs for June suggest that manufacturing sectors strengthened in Turkey, Czechia and Poland but weakened in Russia. Meanwhile, in Czechia and Poland, supply chain disruptions intensified, and there was further evidence of price pressures building across the region.

1 July 2021

Emerging Europe Data Response

Economic Sentiment Indicators (June)

The EC’s Economic Sentiment Indicators showed a further rise in regional sentiment in June, driven by improvements in retail and services sectors. That said, there is also continued evidence of growing price pressures in the region, with firms reporting higher selling price expectations across various sectors.

29 June 2021

Emerging Europe Economics Weekly

Turkey’s quick turnaround, Russia’s latest intervention

The sharp improvement in Turkey’s virus situation has brightened the near-term outlook and presents a risk to our view that the central bank will start an aggressive easing cycle in the coming months. Meanwhile, the temporary export duty imposed on certain metal products in Russia this week is yet another sign that the government is becoming more concerned about the consequences of high and rising inflation.

25 June 2021
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