Monetary policy to get creative in 2011

For much of Emerging Europe growth concerns continue to outweigh inflation worries. Accordingly, monetary policy will remain accommodative in most countries next year. The exception to this is Turkey and, perhaps to a lesser extent, Poland. However, even policymakers in these countries are unlikely to embark on aggressive interest rate hikes since this would only stoke concerns about excessive capital inflows. Instead, monetary policy will become increasingly creative, with other forms of tightening, including raising bank reserve requirements, doing much of the hard work.