The April survey data for Central Europe published this week suggest that the region is weathering the early effects of the Iran war better than the euro-zone. But the surveys also point to a sharp pick-up in price pressures, which could begin to erode Central Europe’s resilience. There was evidence of this in the flash Polish CPI data. Still, we think the energy shock would need to last much longer before the Polish National Bank turns to rate hikes. Otherwise, Romania’s government faces a vote of no confidence next week, which could usher in political instability and complicate efforts to rein in the economy’s large twin deficits.
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