Central Europe inflation, Sberbank sale, Turkish lira

Inflation rose above the upper level of central banks’ target ranges in Central Europe in January for the first time in over seven years but, while the Czech central bank hiked rates last week, it would take a more sustained rise in inflation to prompt policymakers in Hungary and Poland into action. Elsewhere, developments in Russia this week – including the National Welfare Fund’s planned purchase of the central bank’s stake in Sberbank – reinforced our view that the government is serious about loosening fiscal policy this year. Finally, comments from Turkey’s President Erdogan suggest that interest rates will be cut further, but we think his optimism that looser policy won’t result in a weaker lira or higher inflation is likely to prove misguided.