Central banks in Emerging Europe shifted into tightening mode this month as policymakers in Turkey, Russia and Ukraine hiked interest rates in response to pressure on their currencies. The Czech MPC is likely to raise rates later this month, although in response to domestic inflation pressures. And even the extremely dovish Hungarian central bank indicated that it will begin to tighten. Our sense at this stage is that the rate hikes in Turkey and Russia are most likely to be one-offs, but with core price pressures building, we expect the tightening cycle in Central Europe to continue.
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