Emerging Europe Economics

Emerging Europe Economics Focus

8 August, 2017

CEE: Tight labour markets point to more hikes than most expect

We think that natural unemployment rates have fallen by 2.5-3.0%-pts in Central & Eastern Europe over the past decade. Even so, actual rates of unemployment are now significantly below these (lower) natural rates. And, in contrast to many developed markets, this is exerting upward pressure on wages. Accordingly, we expect core inflation to rise gradually over the next year or so, prompting central banks to raise interest rates by more than is currently priced into the markets.

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