The raft of March inflation data released across Emerging Europe this week showed that the regional disinflation process is now well underway, but that core price pressures remain incredibly strong. In Central Europe, the stubbornness of core inflation supports our view that interest rates won’t be cut as far as investors expect over the next couple of years. Elsewhere, the sharp narrowing of Russia's current account surplus continued in Q1 and is taking a greater toll on the ruble – we think there is scope for the currency to fall further this year and next.
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