Emerging Europe & the mid-summer market turmoil

Global financial markets have unwound some of the big moves from late last week and early this week, and we doubt the latest market gyrations will change the economic or policymaking outlook much in Emerging Europe (not least because we think that global equity markets should generally continue to recover). If the sell-off did resume amid fears of a US recession that could, at the margin, encourage a faster pace of monetary easing in the region. That said, we still think that domestic inflation will be key to the policymaking outlook for now, which is why we expect easing cycles to be gradual.