CEE central banks still a long way from turning to cuts

Central banks across Central and Eastern Europe have left interest rates on hold over the past month or so but their communications have continued to strike a relatively hawkish tone. Hungary’s central bank has suggested that interest rates may be kept high for a “prolonged period”, while policymakers in Poland and Czechia have said that the current policy options are keeping rates on hold or delivering further hikes. With inflation at or close to multi-decade highs, this rhetoric will probably continue for a bit longer (although we doubt that central banks will opt for additional rate hikes). Central banks are likely to pivot to interest rate cuts from mid-2023 once inflation falls sharply, but we expect rates to remain at a higher level than most currently expect in 2024.