The rise in inflation in most of Emerging Europe over the past month has caused central banks to adopt a more hawkish tone. Policymakers in Romania and the Czech Republic are likely to hike interest rates further in August, and Hungary’s central bank is starting to shift away from its extremely dovish stance. The key outlier is Turkey, whose central bank defied the markets by leaving rates on hold this month even as inflation hit a 15-year high in June. This seems to be due to pressure from President Erdogan and the lira tumbled as a result. But market pressure should ultimately prevail and more rate hikes are on the cards.
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