Investors pared back their expectations for interest rate hikes in Central Europe this week, but we still think that a fresh pick-up in inflation will prompt more monetary tightening than most anticipate over the course of 2019. As a result, the recent rally in local currency bonds is likely to be reversed in the coming months. Meanwhile, the Turkish government appears to be turning its attention to March’s local elections, adding to the reasons to think that the central bank will start lowering interest rates at this month’s MPC meeting.
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