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Inflation rises again, but further rate cuts still seem likely Turkey’s headline inflation rate rose further in October to reach 19.9% y/y but the small drop in core inflation and political pressure on the central bank means that further interest rate …
3rd November 2021
Supply constraints take a greater toll on industry The manufacturing PMIs in October showed that supply disruptions took a greater toll at the start of Q4, with industrial production growth in Turkey slowing and Czech industry likely to have contracted …
1st November 2021
A strong end to Q3, but virus outbreak dampens outlook Russia’s economy enjoyed a strong end to Q3, but the country’s severe COVID-19 outbreak has clouded the outlook more recently and is likely to cause growth to soften in Q4. Russia’s industrial sector …
29th October 2021
Lira see-saws but CBRT more tolerant A diplomatic spat between Turkey and its Western allies this week was quickly resolved, but it highlighted how vulnerable the lira is to geopolitical developments. And comments from Turkey’s central bank governor …
Further rise in Polish inflation to prompt another rate hike The rise in Poland’s headline inflation rate to 6.8% y/y in October opens the door for the central bank to deliver a 25bp at next week’s MPC meeting. Elsewhere, Czechia’s economy performed a …
The surge in COVID-19 cases and deaths in Eastern Europe has prompted the re-imposition of restrictions and it looks like measures will be stepped up, weighing on recoveries in Q4. Tight restrictions may not remain in place for long across Central Europe, …
28th October 2021
Oil, gas and coal prices have reached multi-year highs in recent weeks and this Update takes a look at some of the implications for the region. In short, an improvement in Russia’s terms of trade has boosted its external position, the public finances and …
Sentiment softens at the start of Q4 The EC’s Economic Sentiment Indicators for October showed that sentiment in industry and services softened across most of Central and Eastern Europe at the start of Q4. With rising virus cases adding to existing …
COVID-19 outbreaks have surged across the region in the past month. Record high daily cases have been reported in Russia, Romania, Bulgaria and Latvia and infections are rising sharply elsewhere. Governments have tightened containment measures, including …
26th October 2021
A renewed wave of COVID-19 cases has prompted some governments to reimpose strict containment measures and talk of lockdowns is becoming more widespread. The downside risks to what are already strong headwinds facing the recovery are mounting. COVID-19 …
22nd October 2021
Russia’s central bank (CBR) stepped up the pace of its tightening cycle again at today’s meeting with a larger-than-expected 75bp interest rate hike, to 7.50%, and the hawkish tone of the accompanying communications suggest that further tightening will be …
Any remaining confidence in the credibility of Turkey’s central bank (CBRT) was shattered after today’s larger-than-expected 200bp interest rate cut, to 16.00%. The lira hit a fresh record low against the dollar and we think that it will continue to …
21st October 2021
Ending Q3 on a positive note The latest activity data suggest that Poland’s economy ended Q3 with solid momentum, and GDP is likely to have risen by 1.6% q/q (4.7% y/y) in Q3 as a whole. But with the re-opening boost fading and supply issues likely to …
Overview – The region has experienced a rapid recovery, but the re-opening boost has now faded and the region is likely to face stronger headwinds in the near term due to surging COVID-19 cases, rising inflation and supply disruptions. Central European …
20th October 2021
GDP in the Baltic States has already surpassed pre-pandemic levels and we expect this strength to be sustained, with growth outpacing Central Europe and the euro-zone as a whole over the coming years. This strong recovery will use up spare capacity fairly …
18th October 2021
Erdogan playing with fire in push for rate cuts After putting the final nails in the coffin of the Turkish central bank’s credibility with last month’s surprise interest rate cut, the grave started to be dug this week with the firing of three MPC members. …
15th October 2021
Inflation close to reaching a peak The further rise in Israeli inflation to 2.5% y/y in September contained no major surprises and we think it will ease towards the lower end of the central bank’s 1-3% target next year. Even so, with the recovery motoring …
Central and Eastern Europe is one of the regions of the world where we think that the risk of sustained higher inflation in the next few years is greatest. The Phillips curve is alive and we think the combination of a cyclical recovery in demand for …
13th October 2021
Economy bounces back from weak start to Q3 Turkey’s industrial sector bounced back in August following a weak start to the quarter and, while retail sales growth slowed, it looks like the economy recorded another robust increase in GDP in Q3. Industrial …
12th October 2021
Poland-EU tensions crank up a notch The decision this week by Poland’s Constitutional Court to rule that some EU laws are in conflict with the Polish Constitution has sent shockwaves through Europe. The ruling gets to the heart of the conflict over the …
8th October 2021
The Bank of Israel revised up its forecast for GDP growth at today’s meeting and struck a more hawkish tone on inflation as it announced that it will end its asset purchase programme later this year. This was in line with expectations, but Governor Yaron …
7th October 2021
Inflation hits a new high, tightening cycle may continue for longer Russian inflation accelerated to a fresh five-year high of 7.4% y/y in September and, while this was mainly driven by a sharp increase in food inflation, the central bank is likely to …
6th October 2021
The National Bank of Poland (NBP) unexpectedly hiked its policy rate by 40bp to 0.50% at today’s MPC meeting, but the accompanying communications were underwhelming and suggest that the rate hike was not as hawkish a move as might have been first …
The Czech parliamentary election that kicks off on Friday looks to be one of the most unpredictable for some time. A victory for the incumbent ANO party would continue the recent trend of loose fiscal policy and support GDP growth, but at the cost of …
The National Bank of Romania (NBR) raised its policy rate by 25bp to 1.50% at today’s meeting, and the backdrop of rising inflation, large twin deficits and currency weakness means that further rate hikes are likely to be delivered over the next 12 …
5th October 2021
Inflation rises, but further rate cuts still on the cards Turkey’s headline inflation rate rose further to 19.6% y/y in September and core inflation partially reversed its recent decline, but political pressure means that the central bank is likely to cut …
4th October 2021
Industry coming off the boil, but consumer demand remains strong Russia’s hard activity data for August showed that industry has continued to struggle while loose fiscal policy has supported consumer spending. We think that consumer demand should hold up …
1st October 2021
CEE: loose fiscal policy set to persist in 2022 Government budget drafts approved for 2022 this week in Czechia and Poland and further details of social support in Hungary suggest that fiscal policy will remain supportive of growth in Central Europe and …
Supply constraints continue to weigh on output The manufacturing PMIs for September provide additional signs that supply constraints continued to weigh on output in Central Europe, although it seems that price pressures eased further. The PMIs for Czechia …
The Czech National Bank (CNB) stepped up the pace of its tightening cycle with a 75bp interest rate hike, to 1.50%, at today’s meeting and its hawkish communications signalled that further aggressive hikes will be delivered in the coming months to tackle …
30th September 2021
Economies across Emerging Europe enjoyed a rapid rebound in Q2, but all the signs suggest that the recovery has come off the boil in Q3. Surveys of sentiment in services sectors have started to flatline and, in some cases, fall. What’s more, hard activity …
29th September 2021
Sentiment falls again as recovery comes off the boil The continued fall in the EC’s Economic Sentiment Indicators for September provides further evidence that the regional recovery in Central and Eastern Europe has slowed in Q3 as supply disruptions have …
Last week’s surprise interest rate cut by Turkey’s central bank is particularly worrying given the backdrop of the country’s fragile external position. While the current account deficit has narrowed and the central bank’s net FX reserves have increased …
27th September 2021
Appetite for further monetary tightening wanes Central banks have started to slow tightening cycles in recent weeks and, in Turkey’s case, begin cutting interest rates. As inflation pressures ease, this pattern is likely to continue. But the Czech …
24th September 2021
Turkey’s central bank (CBRT) unexpectedly cut its one-week repo rate by 100bp to 18.00% today, despite the further rise in inflation in August, and we now think that further aggressive easing is likely over the coming year. But this could ultimately sow …
23rd September 2021
Hungary’s central bank (MNB) slowed the pace of its tightening cycle today, raising its base rate by a smaller-than-expected 15bp to 1.65%, and the post-meeting communications signalled that future rate hikes will remain at the smaller end of the …
21st September 2021
Recovery losing steam Poland’s economy appeared to lose steam in August amid signs that global chip shortages started to weigh on industrial output and retail sales failed to reverse a dip in July. We still think that GDP will rise by a robust 1.5% q/q …
Energy prices adding to inflationary pressures The recent surge in European gas and coal prices will push headline inflation further above central bank’s targets in most countries in the coming months. European coal and natural gas prices have surged over …
17th September 2021
A victory for United Russia in the Duma elections this week will strengthen the government’s recent focus on state intervention in the economy. Social redistribution has become a key priority for the government and large businesses may end up paying for …
15th September 2021
Signs that re-opening inflation is fading The rise in Israeli inflation to an 8-year high of 2.2% y/y in August was partly driven by a chunky rise in housing costs, but there are signs that “re-opening inflation” in services has run its course. We think …
14th September 2021
Weak start for Turkey’s economy in Q3 Turkey’s industrial production and retail sales figures for July suggest that, after putting in a better-than-expected performance in Q2, the economy made a soft start to Q3. Industrial production contracted by 4.2% …
13th September 2021
Rule of law dispute escalates in Poland The Poland-EU dispute over the rule of law reached a breaking point this week and raises the threat of potential fines and a significant delay to receiving EU recovery funds in the coming months. This week brought …
10th September 2021
Russia’s central bank (CBR) slowed down its monetary tightening cycle with a 25bp interest rate hike, to 6.75% at today’s meeting and the accompanying communications suggest that there may be just one more 25bp rate hike, to 7.00%, in this cycle. The …
Inflation hits fresh five-year high, tightening cycle not over Russian inflation rose to a fresh five-year high of 6.7% y/y in August and, while there are some tentative signs that price pressures have started to soften recently, we think the central …
8th September 2021
We estimate that households in Poland, Czechia and Hungary have accumulated “excess” savings worth 4% of GDP so far during the pandemic and this stockpile looks set to grow further in the coming quarters. We don’t expect these excess savings to be spent, …
Poland’s inflation surge splits opinion at the NBP The surge in Polish inflation to a fresh two-decade high in August has shown no sign of prompting a more hawkish shift at the central bank. But with inflation likely to remain stuck above target for some …
3rd September 2021
Inflation jump to delay start of easing cycle The stronger-than-expected Turkish inflation reading of 19.3% y/y in August doesn’t rule out the start of an easing cycle later this year. However, we now only see scope for an interest rate cut at the final …
Economy starting Q3 on decent footing Russia’s activity data for July show that industrial production has come off the boil, but retail sales continued to expand strongly, and the strength of consumer demand will probably keep the central bank in …
1st September 2021
Manufacturing conditions normalise as supply disruptions ease The PMIs for August suggest that manufacturing conditions have softened in Q3 as output and new orders fell further from their recent highs. More than anything, it looks like conditions are …
Economy shrugs off lockdown and expands in Q2 A strong rebound from May’s three-week lockdown meant that Turkey’s economy managed to expand by 0.9% q/q over Q2 as a whole and the early signs are that it carried this momentum into Q3. Robust growth and …
