Rates set to fall as confidence edges up (Jul 09)

Signs of a pick-up in investor confidence means Hungary could resume its monetary-easing cycle later this month, with a further cut in rates also likely in Romania. Elsewhere, we still see room for further interest rate cuts, although policymakers in Poland and the Czech Republic have signalled that rates may now trough higher than we had previously thought. Nonetheless, the bigger picture is that with the pace of the eventual recovery likely to disappoint, rates are likely to stay low throughout 2010. By contrast, the market is pricing in rate hikes next year.