Soft CEE inflation, Russia under more strain

Inflation data released this week for Czechia and Hungary surprised again to the downside, which supports our view that the Czech central bank’s tightening cycle will be short and that the easing cycle in Hungary has further to run. Elsewhere, further Ukrainian drone attacks on Russia’s oil refineries forced the Russian government to announce a ban on diesel exports. For Russia, the ban will help to prevent domestic fuel shortages, which have been stoking inflation pressures and threatening to disrupt activity. But the early signals are that Ukraine’s attacks are more likely to prompt the Kremlin to escalate the conflict rather than push for peace.