Inflation developments vary in the CEE region

On the radar

• March’s inflation rate in Romania arrived at 6.6% y/y while in Hungary it landed at 3.6% y/y.

• Today, Serbia’s central bank holds a rate setting meeting.

Economic developments

Today, we summarize inflation rate development in March and throughout the first quarter. In Czechia and Poland inflation landed at 2% y/y and 1.9% y/y in March, respectively. Both countries currently have inflation at or below the central bank’s targets and the lowest in the region. In Czechia, March is actually the second consecutive month in which inflation is at the target, supporting monetary easing. In Hungary, inflation fell within the tolerance band as is at 3.6% y/y. These three countries, however, are likely to see headline inflation increasing in the second half of the year. On the contrary, in countries such as Croatia, Serbia or Romania (where inflation is currently much higher) headline inflation should gradually fall throughout the year. In Romania, inflation decelerated to 6.6% y/y in March from 7.2% y/y in February, surprising market to the downside. Such development cements the view for the first NBR rate cut at 13 May rate setting meeting.

Market developments

Polish zloty has been strengthening against the euro since the begging of the week as opposed to the Czech koruna or the Hungarian forint. On the bond market, yields have increased marginally since Monday. Today, Serbia’s central bank holds a rate setting meeting and we expect stability of rates. The central bank made it clear that it will wait for the major central banks to make a move before it decides to begin monetary easing on its own. The ECB holds a rate setting meeting today as well. Although there are signs that the key interest rates will be lowered, the statements made in recent weeks suggest that this step will not be taken until the June meeting. The markets' attention will be focused on the interest rate path after the June meeting.

Download The Full CEE Macro Daily