Changes at the top do not change outlook for policy (Apr 10)

Both Poland and the Czech Republic are set to announce new Central Bank governors over the coming months. But we suspect this will do little to alter the policy bias in either country. Poland will be amongst the first in the region to tighten monetary policy (after Turkey which recently announced its own ‘exit strategy’). Nonetheless, the strength of the zloty means that rate hikes are unlikely to arrive before Q4. Meanwhile, after nudging down our GDP growth forecast, we now see rates staying on hold in the Czech Republic until mid-2011. The key point for the entire region, however, is that the pace of tightening, whenever it begins, will be gradual. In fact, there is still room for further easing in Hungary and Romania, and in both cases, rates look set to remain at record lows throughout our two-year forecast horizon.